STOCK PURCHASE AGREEMENT by and among WASHINGTON TRUST BANCORP, INC., WESTON FINANCIAL GROUP, INC. and The Individual Shareholders Party Hereto Dated as of: March 18, 2005
by and
among
WASHINGTON
TRUST BANCORP, INC.,
WESTON
FINANCIAL GROUP, INC.
and
The
Individual Shareholders Party Hereto
Dated as
of: March 18, 2005
TABLE
OF CONTENTS
|
|
Page | |
|
ARTICLE
I.
DEFINITIONS |
2 | |
|
Section
1.1. |
Definitions. |
2 |
|
ARTICLE
II.
PURCHASE AND SALE |
13 | |
|
Section
2.1. |
Purchase
and Sale of the Shares |
13 |
|
Section
2.2. |
Closing
Revenue Adjustment. |
13 |
|
Section
2.3. |
Closing |
14 |
|
Section
2.4. |
Closing
Balance Sheet |
15 |
|
Section
2.5. |
Adjustment
to the Purchase Price |
16 |
|
Section
2.6. |
Contingent
Payments |
16 |
|
Section
2.7. |
Calculation
of Contingent Payments |
18 |
|
Section
2.8. |
Acceleration
of Contingent Payments |
19 |
|
Section
2.9. |
Payment
Procedures |
21 |
|
Section
2.10. |
Setoff |
21 |
|
Section
2.11. |
Spinout
of Real Estate Partnerships and Subsidiaries |
21 |
|
Section
2.12. |
Park
Insurance Agency |
21 |
|
ARTICLE
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
PRINCIPALS |
21 | |
|
Section
3.1. |
Organization
and Qualification of the Company |
22 |
|
Section
3.2. |
Capitalization;
Beneficial Ownership. |
22 |
|
Section
3.3. |
Subsidiaries
and Investments. |
23 |
|
Section
3.4. |
Authority;
No Violation by the Company. |
23 |
|
Section
3.5. |
Real
and Personal Property. |
24 |
|
Section
3.6. |
Clients
and Client Accounts |
25 |
|
Section
3.7. |
Financial
Statements. |
27 |
|
Section
3.8. |
Taxes. |
28 |
|
Section
3.9. |
Collectibility
of Accounts Receivable |
30 |
|
Section
3.10. |
Absence
of Certain Changes |
31 |
|
Section
3.11. |
Ordinary
Course |
32 |
|
Section
3.12. |
Banking
Relations |
32 |
|
Section
3.13. |
Intellectual
Property. |
32 |
|
Section
3.14. |
Contracts |
34 |
|
Section
3.15. |
Litigation |
35 |
|
Section
3.16. |
Compliance
with Laws. |
36 |
|
Section
3.17. |
Business;
Registrations. |
36 |
|
Section
3.18. |
Mutual
Funds |
39 |
|
Section
3.19. |
Compliance
Policies and Procedures |
43 |
|
Section
3.20. |
Insurance
Agency Matters |
43 |
|
|
|
Page |
|
Section
3.21. |
Transactions
with Interested Persons |
44 |
|
Section
3.22. |
Employee
Benefit Programs |
45 |
|
Section
3.23. |
List
of Directors, Officers and Employees. |
46 |
|
Section
3.24. |
Insurance |
48 |
|
Section
3.25. |
Powers
of Attorney |
48 |
|
Section
3.26. |
Finder’s
Fee |
48 |
|
Section
3.27. |
Non-Foreign
Status |
48 |
|
Section
3.28. |
Corporate
Records; Copies of Documents |
48 |
|
Section
3.29. |
Disclosure |
49 |
|
ARTICLE
IV.
REPRESENTATIONS AND WARRANTIES OF EACH PRINCIPAL |
49 | |
|
Section
4.1. |
Ownership
Interests |
49 |
|
Section
4.2. |
Authority |
50 |
|
Section
4.3. |
Finder’s
Fee |
50 |
|
Section
4.4. |
Investment
Advisory Representation |
50 |
|
Section
4.5. |
Agreements |
50 |
|
Section
4.6. |
Employment
Date |
51 |
|
Section
4.7. |
Non-Foreign
Status |
51 |
|
ARTICLE
V.
REPRESENTATIONS AND WARRANTIES OF EACH OTHER SHAREHOLDER AND EACH
PRINCIPAL |
51 | |
| REGARDING THE OTHER SHAREHOLDERS. | ||
|
Section
5.1. |
Ownership
Interests |
51 |
|
Section
5.2. |
Authority |
51 |
|
Section
5.3. |
Finder’s
Fee |
52 |
|
ARTICLE
VI.
REPRESENTATIONS AND WARRANTIES OF THE BUYER |
52 | |
|
Section
6.1. |
Organization |
52 |
|
Section
6.2. |
Authority;
No Violation. |
52 |
|
Section
6.3. |
Consents
and Approvals |
52 |
|
Section
6.4. |
No
Actions, Suits or Proceedings |
53 |
|
Section
6.5. |
Financial
Ability |
53 |
|
Section
6.6. |
No
Other Broker |
53 |
|
Section
6.7. |
Eligibility
to Make Election under Bank Holding Company Act |
53 |
|
ARTICLE
VII.
COVENANTS |
53 | |
|
Section
7.1. |
Conduct
of Business. |
53 |
|
Section
7.2. |
Public
Announcements |
57 |
|
Section
7.3. |
Access;
Certain Communication. |
57 |
|
Section
7.4. |
Reasonable
Best Efforts; Further Assurances |
58 |
|
Section
7.5. |
Regulatory
Matters; Third Party Consents. |
58 |
|
Section
7.6. |
Employee
Matters |
59 |
|
Section
7.7. |
Notification
of Certain Matters |
60 |
|
Section
7.8. |
Changes
in Assets Under Management |
61 |
|
Section
7.9. |
Maintenance
of Records. |
61 |
|
|
|
Page |
|
Section
7.10. |
Non‑Competition/Non-Solicitation |
61 |
|
Section
7.11. |
Non-Solicitation
of Other Offers |
62 |
|
Section
7.12. |
No
Transfer of Shares |
62 |
|
Section
7.13. |
Covenants
With Respect to Section 15(f) of the Investment Company
Act |
62 |
|
ARTICLE
VIII.
CONDITIONS TO CLOSING |
63 | |
|
Section
8.1. |
Conditions
to Buyer’s Obligations |
63 |
|
Section
8.2. |
Conditions
to the Company’s and the Principals’ Obligations |
65 |
|
Section
8.3. |
Mutual
Conditions |
66 |
|
ARTICLE
IX.
INDEMNIFICATION |
67 | |
|
Section
9.1. |
Survival |
67 |
|
Section
9.2. |
Indemnification. |
67 |
|
Section
9.3. |
Procedures |
68 |
|
Section
9.4. |
No
Contribution or Similar Rights |
68 |
|
Section
9.5. |
Reductions
for Insurance Proceeds and Other Recoveries |
69 |
|
Section
9.6. |
Sole
and Exclusive Remedy |
69 |
|
ARTICLE
X.
CERTAIN TAX MATTERS |
69 | |
|
Section
10.1. |
General |
69 |
|
Section
10.2. |
Tax
Indemnification |
70 |
|
Section
10.3. |
Straddle
Period |
70 |
|
Section
10.4. |
Responsibility
for Filing Tax Returns |
70 |
|
Section
10.5. |
Cooperation
on Tax Matters. |
70 |
|
Section
10.6. |
Tax-Sharing
Agreements |
71 |
|
Section
10.7. |
Certain
Taxes and Fees |
71 |
|
ARTICLE
XI.
TERMINATION/SURVIVAL |
71 | |
|
Section
11.1. |
Termination. |
71 |
|
Section
11.2. |
Effect
of Termination |
72 |
|
ARTICLE
XII.
MISCELLANEOUS |
72 | |
|
Section
12.1. |
Expenses. |
72 |
|
Section
12.2. |
Amendments;
Waiver. |
72 |
|
Section
12.3. |
Entire
Agreement |
73 |
|
Section
12.4. |
Specific
Performance; Injunctive Relief |
73 |
|
Section
12.5. |
Severability |
73 |
|
Section
12.6. |
Notices |
73 |
|
Section
12.7. |
Binding
Effect; No Third-Party Beneficiaries; No
Assignment |
74 |
|
Section
12.8. |
Counterparts |
74 |
|
Section
12.9. |
Governing
Law |
74 |
|
Section
12.10. |
Service;
Jurisdiction |
74 |
|
Section
12.11. |
WAIVER
OF JURY TRIAL |
75 |
|
Section
12.12. |
Drafting
Conventions; No Construction Against Drafter. |
75 |
|
|
|
Page |
|
Section
12.13. |
Shareholders’
Representative |
75 |
| EXHIBITS | ||
| Exhibit A | Form of Investment Advisory Notice | |
| Exhibit B-1 |
Form of
Opinion of Xxxxx Xxxxxxx LLP and Xxxxxxxxx Traurig LLP |
|
|
Exhibit B-2 |
Form of Opinion of Xxxxxxx Procter LLP | |
| Exhibit C | Form of Employment Agreement | |
| Exhibit 3.6 | Forms of Advisory Contracts |
THIS
STOCK PURCHASE AGREEMENT, dated as of March 18, 2005 (this “Agreement”), is by
and among Washington Trust Bancorp, Inc., a Rhode Island corporation (the
“Buyer”),
Weston Financial Group, Inc., a Massachusetts corporation (the “Company”), I.
Xxxxxxx Xxxxxxxx, Xxxxxx Xxxxxx, Xx., Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxxx,
Xxxxxx X. Stock and Xxxxxx X. Xxxxxxxx (those individuals, collectively, the
“Principals”), and
the Persons listed on the signature page to this Agreement under the heading
“Other Shareholders” (the Principals and the Other Shareholders are referred to
herein collectively as the “Shareholders”).
RECITALS
WHEREAS,
the Company and its Subsidiaries are engaged in the business of providing
investment management and advisory services, and of selling certain insurance
products and services, to accounts of certain institutional and individual
investors;
WHEREAS,
as of the date of this Agreement, the issued and outstanding shares of the
capital stock of the Company consists of (a) 1,399,998 shares of the Company’s
Common Stock, par value $.001 per share (that stock, the “Common
Stock”; those
shares of Common Stock, the “Common
Shares”), (b)
800 shares of the Company’s Class AA Common Stock, par value $.001 per share
(that stock, the “Class
AA Stock”) and
(c) 375 shares of the Company’s Series A Convertible Preferred Stock, par value
$.01 per share (that stock, the “Series
A Preferred Stock”);
WHEREAS,
as of the date hereof, the Principals own all of the Common Shares and the
Other
Shareholders own all
of the issued and outstanding shares of Class AA Stock and Series A Preferred
Stock (the shares of Series A Preferred Stock and the shares of Class AA Stock
held by the Other Shareholders shall be referred to as the “Other
Shares”);
WHEREAS,
prior to the Closing, the Principals and the Company shall cause the Company (a)
to distribute the shares of the Real Estate Subsidiaries (as defined below in
Section 1.1(a)) to the Shareholders as a dividend pro rata to their interests in
accordance with Schedule 2.3(a) and (b)
to take all such other actions as are necessary or appropriate to ensure that,
as of the Closing, the Company does not directly or indirectly own any shares of
capital stock or other securities of or ownership interests with respect to any
of the Real Estate Subsidiaries (those share distributions and all actions
related thereto, collectively, the “Real
Estate Separation”);
WHEREAS,
prior to the Closing, the Principals holding shares of capital stock of Park
shall transfer such shares to the Company so that, at the time of the Closing,
Park is a wholly owned subsidiary of the Company.
WHEREAS,
the parties desire to enter into this Agreement to provide for the acquisition
by the Buyer of the Company through the purchase by the Buyer from the
Principals and the
Other
Shareholders of the Common Shares and the Other Shares (referred to xxxxx
collectively as the "Shares")
NOW,
THEREFORE, the parties agree as follows:
ARTICLE
I.
DEFINITIONS
Section
1.1. Definitions.
(a) For all
purposes in this Agreement, the following terms have the respective meanings set
forth in this Section 1.1:
“Acquired
Business” means
the Company and its Subsidiaries and all businesses conducted jointly or
individually by them as of the Closing. The Principals understand and agree that
nothing in this Agreement prohibits or in any way limits the Buyer and its
Affiliates from reorganizing some or all of the components of the Acquired
Business within the Combined Buyer Group, and the Buyer understands and agrees
that no such reorganization will extinguish or otherwise limit the Buyer’s
obligations under this Agreement, including its obligations that relate to the
Contingent Payments (as defined below in this Section 1.1(a)) and the Bonus Plan
(each as defined in Section 6.6(a)).
“Adjusted
Fees” means
the sum of (i) aggregate Annual Investment Advisory Revenue of all Retained
Client Accounts plus (ii) the
aggregate Annual Investment Advisory Revenue of all Mutual Funds that are
Retained Clients, with the calculation of Annual Investment Advisory Revenue
being subject to the following adjustments for purposes of this definition (and
not for the definition of Reference Fees):
(i) The
aggregate Annual Investment Advisory Revenue of all Retained Client Accounts
shall be increased to reflect the effect of each account with the Company that
(A) is opened by a Retained Client who is not a Related Person between January
1, 2005 and the close of business on the third Business Day prior to the Closing
Date and (B) is managed by a Manager, by multiplying (1) the result obtained by
adding the fair market value of any assets contributed to that account and
reduced by the fair market value of any assets withdrawn from that account, in
each case between January 1, 2005 and the close of business on the third
Business Day prior to the Closing Date (with appropriate netting adjustments
being made with respect to those contributions and withdrawals and with fair
market value determined as of the date of the applicable contribution or
withdrawal, as the case may be), times (2) the
product of (x) the result of dividing (a) the total revenues of the Company
during the most recent billing cycle of the Manager of that account ending prior
to the close of business on the third Business Day prior to the Closing Date
that are derived from all Client Accounts managed by the Manager of that account
by (b) the
total assets under management of all those Clients Accounts as of the end of
that billing cycle times (y) an
appropriate annualization factor that is based on the frequency of the billing
cycle for that Manager, subject to adjustment
in the
case of any event that occurs subsequent to the end of that billing cycle that
would have changed the foregoing calculation if it had occurred during that
billing cycle.
(ii) For each
Retained Client Account that is not owned by a Related Person, Base Date Account
Value will be increased by the fair market value of any assets contributed to
that Retained Client Account and reduced by the fair market value of any assets
withdrawn from that Retained Client Account, in each case between January 1,
2005 and the close of business on the third Business Day prior to the Closing
Date (with appropriate netting adjustments being made with respect to those
contributions and withdrawals and with fair market value determined in each case
as of the date of the applicable contribution or withdrawal, as the case may
be); provided that in
the case of the Client identified by the code C001679 on Schedule
3.6(a), if that
Client is a Retained Client, there shall not be taken into account the effect of
the withdrawal by that Client on or about January 11, 2005 of an aggregate
amount of $3,899,172 from that Client’s Client Accounts, unless, between the
Base Date and the close of business on the third Business Day prior to the
Closing Date, that Client reduces the annual retainer fee that Client pays to
the Company below $35,000, in which case the effect of that $3,889,172
withdrawal shall be taken into account in the same proportion that the reduction
in the retainer fee bears to $35,000.
(iii) For each
Retained Client Account, the Applicable Rate will be the product of (A) the
result of dividing (1) the total revenues of the Company during the most recent
billing cycle of the Manager of that Client Account ending prior to the close of
business on the third Business Day prior to the Closing Date that are derived
from all Client Accounts managed by the Manager of that Client Account
by (2) the
total assets under management of all those Clients Accounts as of the end of
that billing cycle times (B) an
appropriate annualization factor that is based on the frequency of the billing
cycle for that Manager, subject to adjustment in the case of any event that
occurs subsequent to the end of that billing cycle that would have changed this
calculation of Applicable Rate if it had occurred during that billing
cycle.
(iv) For each
Mutual Fund that is a Retained Client, Base Date Account Value will be increased
by the fair market value of any assets contributed to that Mutual Fund by its
shareholders who are not Related Persons and reduced by the fair market value of
any assets withdrawn from that Mutual Fund, in each case between January 1, 2005
and the close of business on the third Business Day prior to the Closing Date
(with appropriate netting adjustments being made with respect to those
contributions and withdrawals and with fair market value determined in each case
as of the date of the applicable contribution or withdrawal, as the case may
be).
(v) For each
Mutual Fund that is a Retained Client, the Applicable Rate will be the product
of (A) the result obtained by dividing (1) the total revenues of the Company
during the most recent billing cycle of that Mutual Fund ending prior to the
close of business on the third Business Day prior to the Closing Date that are
derived from that Mutual Fund by (2) the
Net Asset Value of that Mutual Fund as of the end of that billing cycle
times (B) an
appropriate annualization factor that is based on the frequency of the billing
cycle for that Mutual Fund, subject to adjustment in the case of
any event
that occurs subsequent to the end of that billing cycle that would have changed
this calculation of Applicable Rate if it had occurred during that billing
cycle.
“Advisers
Act” means
the Investment Advisers Act of 1940, as amended, and the rules and regulations
thereunder.
“Advisory
Contract” means a
written contract between a Client or a New Client and the Company, containing
the terms and conditions set forth on Exhibit
3.6.
“Affiliate” means,
with respect to any Person, any other Person directly or indirectly controlling,
controlled by, or under common control with that Person, provided that
neither the Company nor any of its Subsidiaries is to be considered an Affiliate
of any Shareholder under this Agreement.
“Annual
Investment Advisory Revenue” means
(i) for a Client Account, the product of the Base Date Account Value for that
Client Account times the
Applicable Rate for that Client Account and (ii) for a Mutual Fund, the
aggregate annual revenue projected to be realized by the Company as an advisory
fee or a 12b-1 fee with respect to that Mutual Fund, as determined based on the
product of the Base Date Account Value for that Mutual Fund times the
Applicable Rate for that Mutual Fund, in each case as set forth on Schedule
3.6(a) and
subject to the adjustments that may apply to the calculation of Adjusted Fees.
For each New Client Account, Annual Investment Advisory Revenue means the
product of (A) the result of (x) the fair market value of any assets contributed
to that New Client Account between January 1, 2005 and the close of business on
the third Business Day prior to the Closing minus (z) the
fair market value of any assets withdrawn from that Client Account during that
same period (with appropriate netting adjustments being made with respect to
those contributions and withdrawals and with fair market value determined in
each case as of the date of the applicable contribution or withdrawal, as the
case may be) times (B) the
weighted-average annual rate, based on assets under management, at which the
Company charges clients of the Company for assets managed by the Manager of that
New Client Account, calculated on the basis of the most recent billing statement
for that Manager (either quarterly or monthly, as the case may be) prior to the
close of business on the third Business Day prior to the Closing Date, subject
to adjustment in the case of any event that changes that rate following the date
of that billing statement that is announced, published or otherwise becomes
known to the Company.
“Applicable
Law” means
any applicable domestic or foreign federal, state or local statute, law,
ordinance, rule, administrative interpretation, regulation, order, writ,
injunction, directive, judgment, decree, policy, guideline or other requirement
of any Governmental Authority.
“Applicable
Rate” means
with respect to a Client Account or a Mutual Fund, the fee rate (expressed as a
percentage) that is set forth opposite the name of that Client Account or Mutual
Fund, as the case may be, on Schedule
3.6(a), in each
case subject to the adjustments that may apply to the calculation of Adjusted
Fees. The Applicable Rates set forth on Schedule
3.6(a)
represent (i) in the case of a Client Account, the product of (A) the result of
dividing the total revenues of the Company during the month of December 2004
derived from all Client Accounts managed by the Manager of that Client Account
by the
total assets under management
of all
those Clients Accounts as of the Base Date times (B)
twelve and (ii) in the case of a Mutual Fund, the product of (C) the result of
dividing the total revenues of the Company during the month of December 2004
derived from that Mutual Fund by the Net
Asset Value of that Mutual Fund as of the Base Date times (D)
twelve.
“Base
Date” means
December 31, 2004.
“Base
Date Account Value” means
(i) for a Client Account, the fair market value of the assets in such Client
Account as of the close of business on the Base Date and (ii) for a Mutual Fund,
the Net Asset Value of that Mutual Fund as of the close of business on the Base
Date, in each case as set forth on Schedule
3.6(a) and
subject to the adjustments that may apply to the calculation of Adjusted Fees;
provided that, in
order to avoid duplication in calculations contemplated by this Agreement that
are based on the foregoing definition, the fair market value of assets in a
Client Account will not include the fair market value of shares in any Mutual
Fund that are held in that Client Account.
“Brokerage
Services” means
the mutual-fund sales and prospectus distribution and other broker-dealer
services performed by WSC as of the Closing in connection with the Acquired
Business.
“Business
Day” means
any day other than a Saturday, a Sunday or a day on which state-chartered banks
in the State of Rhode Island generally are closed for regular banking
business.
“Clients” means,
collectively, (i) the Persons that own the Client Accounts and (ii) the Mutual
Funds. For the avoidance of doubt, a Person will not be considered a Client
solely because such Person is a shareholder of a Mutual Fund.
“Client
Account” means
an account that is (i) opened and maintained by a Client in accordance with an
Advisory Contract or a Financial Planning Contract and (ii) listed on
Schedule
3.6(a).
“Client
Consent” means,
with respect to a Client, a Client Consent Request countersigned by that
Client.
“Client
Consent Request” means a
written notice delivered by the Company to a Client or a New Client that
describes the transactions contemplated by this Agreement and requests the
written consent of that Client or New Client to the transactions contemplated by
this Agreement (including any assignment of an Advisory Contract that is deemed
to occur under the Advisers Act) with respect to all Client Accounts or New
Client Accounts of that Client or New Client and the agreement of that Client or
New Client to continue its business relationship with the Company following the
Closing on the same terms and to the same extent as it exists on the date of
this Agreement. For purposes of this Agreement, a Client Consent Request will be
deemed to have been received by a Client or a New Client three business days
following the date that the Company sends the Client Consent Request to that
Client or New Client.
“Closing
Date” means
the date the Closing takes place.
“Closing
Revenue Adjustment Amount” means
(i) if the Closing Revenue Ratio equals or exceeds 0.95, then $0 or (ii) if the
Closing Revenue Ratio is less than 0.95, then an amount equal to the product of
(A) the excess of 0.95 over the Closing Revenue Ratio times (B) a
fraction, the numerator of which is four and the denominator of which is three,
times (C)
$20,000,000; provided that in
no event may the Closing Revenue Adjustment Amount exceed
$4,000,000.
“Closing
Revenue Ratio” means
the ratio obtained by dividing (i) the sum of (A) Adjusted Fees plus (B) New
Client Fees by (ii)
Reference Fees.
“Code” means
the Internal Revenue Code of 1986, as amended, and the rules and regulations
thereunder.
“Combined
Buyer Group” means,
collectively, the Buyer and its Affiliates (including the Acquired Business)
following the Closing.
“Contingent
Payment” means
any of the First Contingent Payment, the Second Contingent Payment and the Third
Contingent Payment.
“Designated
Territory” means
Rhode Island, Connecticut, Massachusetts, New York, New Jersey, New Hampshire,
Vermont, Maine, Minnesota, North Carolina, Pennsylvania, Florida and
California.
“Encumbrance” means
any lien, pledge, security interest, claim, charge, easement, limitation,
commitment, encroachment, restriction or encumbrance of any kind or nature
whatsoever.
“Environmental
Law” means
all federal, state and local laws, rules, regulations, common law, ordinances,
decrees, orders, contracts and other binding obligations relating to pollution
(including the treatment, storage and disposal of wastes and the cleanup of
releases and threatened releases of materials), the preservation of the
environment or the exposure to materials in the environment or
workplace.
“ERISA” means
the Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations thereunder.
“Exchange
Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.
“Financial
Planning Contract” means
any written contract, retainer agreement, arrangement or understanding under
which the Company provides financial planning or similar services to any
Person.
“GAAP” means
generally accepted accounting principles in the United States of America as in
effect from time to time.
“Governmental
Authority” means
any nation or government, any state, territory or other political subdivision,
any entity exercising executive, legislative, judicial, regulatory or
administrative
functions of or pertaining to government, including the SEC or any other
government authority, agency, department, board, commission or instrumentality
of the United States, any foreign government, any state or territory of the
United States or any political subdivision thereof, and any court, tribunal or
arbitrator of competent jurisdiction, and any governmental or non-governmental
self-regulatory organization, agency or authority (including the National
Association of Securities Dealers, Inc., the Commodities and Futures Trading
Commission, the National Futures Association, the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of
the Comptroller of the Currency, the Office of Trust Supervision and the Rhode
Island Department of Business Regulation).
“Immediate
Family” means,
with respect to any natural person, that person’s spouse, parents, grandparents,
children, grandchildren and siblings, nieces, nephews and in-laws (and estates,
trusts, partnerships and other entities and legal relationships of which at
least a majority in interest of the beneficiaries, owners, investors, members or
participants at all times in question are, directly or indirectly, one or more
of the persons described above, including that natural person).
“Insurance
Services” means
the insurance agency and brokerage services performed by Park as of Closing.
“Intellectual
Property” means
(i) inventions, whether or not patentable, reduced to practice or made the
subject of one or more pending patent applications, (ii) national and
multinational statutory invention registrations, patents and patent applications
(including all reissues, divisions, continuations, continuations-in-part,
extensions and reexaminations thereof) registered or applied for in the United
States and all other nations throughout the world, all improvements to the
inventions disclosed in each such registration, patent or patent application,
(iii) trademarks, service marks, trade dress, logos, domain names, trade names
and corporate names (whether or not registered) in the United States and all
other nations throughout the world, including all variations, derivations,
combinations, registrations and applications for registration of the foregoing
and all goodwill associated therewith, (iv) copyrights (whether or not
registered) and registrations and applications for registration thereof in the
United States and all other nations throughout the world, including all
derivative works, moral rights, renewals, extensions, reversions or restorations
associated with such copyrights, now or hereafter provided by law, regardless of
the medium of fixation or means of expression, (v) computer software (including
source code, object code, firmware, operating systems and specifications), (vi)
trade secrets and, whether or not confidential, business information (including
pricing and cost information, business and marketing plans and customer and
supplier lists) and know-how (including processes, models, formulas, operating
platforms and techniques and research and development information), (vii)
industrial designs (whether or not registered), (viii) databases and data
collections, (ix) copies and tangible embodiments of any of the foregoing, in
whatever form or medium, (x) all rights to obtain and rights to apply for
patents, and to register trademarks and copyrights, (xi) all rights in all of
the foregoing provided by treaties, conventions and common law and (xii) all
rights to xxx or recover and retain damages and costs and attorneys’ fees for
past, present and future infringement or misappropriation of any of the
foregoing.
“Investment
Company Act” means
the Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.
“Investment
Company” means
any Person registered or required to be registered as an investment company
under the Investment Company Act.
“Investment
Management Services”
means any
services that involve (i) the sponsorship, administration or
management of an investment fund (or portions thereof or a group of investment
funds), (ii) the management of an investment account (or portions thereof or a
group of investment accounts), (iii) the giving of advice with respect to either
the investment and/or reinvestment of assets or funds (as any group of assets or
funds) or the selection of investment management professionals or firms, (iv)
personal financial planning for individuals, including the preparation of
personal financial plans and tax returns, the monitoring of investments and the
performance of general consulting with respect to taxes, investments or other
personal financial matters, or (v) presentations on financial planning matters
to groups through seminars and similar programs.
“IRS” means
the United States Internal Revenue Service.
“knowledge
of the Company” or any
similar qualification regarding the knowledge of the Company or any of its
Subsidiaries or the Principals means to the knowledge of any of I. Xxxxxxx
Xxxxxxxx, Xxxxxx Xxxxxx, Xx., Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxxx, Xxxxxx X.
Stock, Xxxxxx X. Xxxxxxxx, Xxxxxx Xxxxxxxx, or Xxxxxxx X. XxXxxxx in each case
after due inquiry.
“Lost
Client” means a
Client who, as of the close of business on the third Business Day prior to the
Closing Date, is not a Retained Client.
“Lost
Client Account” means a
Client Account that was owned by a Lost Client on the Base Date.
“Manager” means
one of the fifteen portfolio managers listed on Schedule
3.6(a).
“Material
Adverse Effect” means a
material adverse effect on the condition (financial or otherwise), business,
assets, liabilities or results of operations of the Company and its
Subsidiaries, taken as whole; provided
that, for
the purposes of Section 8.1(a) and 8.1(h), the term “Material Adverse Effect”
will be deemed not to include any such material adverse effect that is primarily
attributable to (i) changes affecting the United States or foreign economies in
general or affecting the investment management industry in general, (ii) changes
in Applicable Law or (iii) military conflicts or acts of terrorism, as long as,
in the case of any change or event described by clause (i), (ii) or (iii), that
change or event does not disproportionately affect the Company or its
Subsidiaries relative to other participants in the investment management
industry.
“Mutual
Fund Consent” means,
with respect to a Mutual Fund, the approval by a majority of the shareholders of
that Mutual Fund of the change in control of its investment advisor that results
from the transactions contemplated by this Agreement at a duly convened
meeting
called by the trustees of that Mutual Fund pursuant to an applicable Proxy
Statement (as defined in Section 7.5(b)).
“Mutual
Fund Governing Documents” means,
with respect to each Mutual Fund, that Mutual Fund’s declaration of trust ands
by-laws, in each case as amended.
“Mutual
Funds” means,
collectively, the New Century Capital Portfolio, the New Century Balanced
Portfolio, the New Century Aggressive Portfolio, the New Century International
Portfolio, the New Century Alternative Strategies Portfolio and the New Century
Money Market Portfolio.
“Negative
Consent” means,
with respect to any Client who receives a Client Consent Request and does not
deliver a Client Consent to the Company, the failure of that Client within 60
days of its receipt of a Client Consent Request to notify or otherwise
communicate to the Company or any of the Principals regarding its intention to
terminate its business relationship with the Company or any of its
Subsidiaries.
“Net
Asset Value” means,
with respect to a Mutual Fund as of a specified time, the net asset value of
that Mutual Fund, as determined in accordance with the Mutual Fund Governing
Documents and the prospectus of that Mutual Fund that is in effect as of the
specified time.
“New
Century Portfolios” means
New Century Portfolios, a Massachusetts business trust.
“New
Client” means a
Person, other than a Client, that is not a Related Person that enters into an
Advisory Contract or a Financial Planning Contract following the Base
Date.
“New
Client Account” means
an account with the Company that is opened and maintained by a New Client in
accordance with an Advisory Contract or a Financial Planning Contract and
managed by a Manager.
“New
Client Fees” means
the aggregate Annual Investment Advisory Revenue of all Retained Client Accounts
of New Clients, as set forth on the Revised Client Revenue Schedule (as defined
in Section 2.2(a)).
“Park” means
The Park Insurance Agency, Inc., a Massachusetts corporation.
“Permitted
Encumbrances” means
Encumbrances that:
(i) are
disclosed on the Base Balance Sheet;
(ii) are for
taxes or assessments that are not yet due and payable (and for which adequate
reserves or accruals are established on the Base Balance Sheet); or
(iii) do not
materially detract from the value of, or materially interfere with the present
or intended use of, the assets or property affected by those
Encumbrances.
“Person” means
an individual, corporation, partnership, limited liability company, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
“Real
Estate Partnerships” means
Weston Multivest III L.P., Weston Multivest IV L.P., Weston Properties XIX L.P.,
Weston Properties XXII L.P. and Weston Multivest Capital Associates,
L.P.
“Real
Estate Subsidiaries” means
Weston Multivest Corporation, Inc., Weston Properties Corporation, Inc. and
Weston Haverhill Inc.
“Records” means
all records and original documents in the possession or maintained on behalf of
the Company or any of its Subsidiaries or any of the Principals that pertain to
or are utilized by the Company and its Subsidiaries to administer, reflect,
monitor, evidence or record information respecting the business or conduct of
the Company, its Subsidiaries and/or the Mutual Funds, including (i) all such
records maintained on electronic or magnetic media, or in the electronic
database system of the Company and its Subsidiaries and (ii) all such records
and original documents necessary or appropriate to comply with any Applicable
Law, including any and all records kept in accordance with the requirements of
the Advisers Act or the Investment Company Act or documents filed pursuant to
any other Applicable Laws.
“Reference
Fees” means
the sum of (i) the aggregate Annual Investment Advisory Revenue of all Client
Accounts plus (ii) the
aggregate Annual Investment Advisory Revenue of all Mutual Funds, as set forth
on Schedule
3.6(a) under
the heading “Reference Fees”.
“Representation
Agreement” means,
with respect to each Other Shareholder, an agreement under which the Other
Shareholder appointed the Company and each of the Principals as that Other
Shareholder’s agent and attorney-in-fact for certain matters in connection with
the transactions contemplated by this Agreement, all on the terms and subject to
the conditions set forth therein.
“Retained
Client” means a
Client or a New Client who, as of the close of business on the third Business
Day prior to the Closing Date, (i) has not (A) terminated its business
relationship with the Company or any of its Subsidiaries or (B) notified or
otherwise communicated to the Company or any of the Principals regarding its
intention to do so and (ii) (C) in the case of a Client that is not a Mutual
Fund or a New Client, has either delivered to the Company a Client Consent or is
deemed to have provided a Negative Consent, that in either case applies to all
Client Accounts of that Client (including any Client Accounts opened by that
Client between January 1, 2005 and the close of business on the third Business
Day prior to the Closing Date) or New Client Accounts of that New Client, as
applicable; provided that a
Client that is a party to an Advisory Contract listed on Schedule
3.6(c) must
deliver a Client Consent in order to be considered a Retained Client, and (D) in
the case of a Client that is a Mutual Fund, has delivered a Mutual Fund
Consent.
“Retained
Client Account” means
(i) with respect to a Client, a Client Account that is owned by a Retained
Client on the Base Date and at the close of business on the third
Business
Day prior to the Closing Date and (ii) with respect to a New Client, a New
Client Account owned by a Retained Client at the close of business on the third
Business Day prior to the Closing Date.
“SEC” means
the United States Securities and Exchange Commission.
“Securities
Act” means
the Securities Act of 1993, as amended, and the rules and regulations
thereunder.
“Subsidiary” means
any Person with respect to which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions are directly or indirectly owned by another
Person. For purposes of this Agreement, Park shall be deemed a Subsidiary of the
Company, and the Real Estate Subsidiaries shall not be deemed Subsidiaries of
the Company.
“Supplemental
Confidentiality Agreement” means
the letter agreement dated March 16, 2005 between the Buyer and the
Company.
“Tax
Authority”
includes the IRS and any state, local, foreign or other governmental authority
responsible for the administration of any Taxes (as defined in
Section 3.8).
“Tax
Return” means
any return, report, information statement, schedule or other document (including
any related or supporting information) with respect to Taxes.
“Treasury
Regulations” means
the regulations promulgated under the Code.
“Unbooked
Brokerage Commissions” means
fees receivable by the Company or any Subsidiary from any insurance company or
with respect to any Brokerage Services, or from any Principal pursuant to
Section 2.12 or otherwise, in each case as set forth on a schedule delivered by
the Company to the Buyer at the Closing.
“WSC” means
Weston Securities Corporation, Inc., a Massachusetts corporation and
wholly-owned subsidiary of the Company.
(b) The
following terms have the meaning specified in the indicated section of this
Agreement:
|
Term
|
Section
|
|
2006
EBITDA |
Section
2.6(d)(iv) |
|
2007
EBITDA |
Section
2.6(d)(v) |
|
2008
EBITDA |
Section
2.6(d)(vi) |
|
Accounting
Referee |
Section
2.2(b) |
|
Acquired
Business Pretax Income |
Section
7.6(a) |
|
Agreement |
Preamble |
|
Balance
Sheet Date |
Section
3.7(c) |
|
Base
Balance Sheet |
Section
3.7(c) |
|
Bonus
Plan |
Section
7.6(a) |
|
Buyer |
Preamble |
|
Buyer
Indemnified Parties |
Section
9.2(a) |
|
Buyer’s
Revenue Adjustment Amount |
Section
2.2(a) |
|
By-laws |
Section
3.1 |
|
Charter |
Section
3.1 |
|
Class
AA Stock |
Recitals |
|
Closing |
Section
2.3 |
|
Closing
Balance Sheet |
Section
2.4(a) |
|
Closing
Working Capital |
Section
2.4(a) |
|
Common
Stock |
Recitals |
|
Company |
Preamble |
|
Company
Organizational Documents |
Section
3.1 |
|
Company
Securities |
Section
3.2(b) |
|
Damages |
Section
9.2(a) |
|
Earnout
Period |
Section
2.6(e) |
|
EBITDA |
Section
2.6(d)(vii) |
|
Existing-Business
Transfer |
Section
2.6(e) |
|
Expenses
|
Section
2.6(d)(ix) |
|
Final
Closing Revenue Adjustment Amount |
Section
2.2(b) |
|
Final
EBITDA |
Section
2.7(b) |
|
Final
Working Capital |
Section
2.5(a) |
|
Financial
Statements |
Section
3.7(a)(iii) |
|
First
Contingent Payment |
Section
2.6(d)(i) |
|
Fund
Agreements |
Section
3.18(b) |
|
Fund
Financial Statement |
Section
3.18(n) |
|
Fund
Regulatory Documents |
Section
3.18(k) |
|
Indemnified
Party |
Section
9.3 |
|
Indemnifying
Party |
Section
9.3 |
|
Insurance
Clients |
Section
3.20(b) |
|
Leased
Real Property |
Section
3.5(a) |
|
Leases |
Section
3.5(a) |
|
Licensed
Intellectual Property |
Section
3.13(c) |
|
Open
Contingent Payments |
Section
2.8(a) |
|
Other
Shareholders |
Recitals |
|
Other
Shares |
Recitals |
|
Pre-Closing
Tax Period |
Section
10.2 |
|
Preliminary
Schedule |
Section
2.7(a) |
|
Prime
Rate |
Section
2.5(b) |
|
Principals |
Preamble |
|
Proxy
Statement |
Section
7.5(c) |
|
Purchase
Price |
Section
2.1 |
|
Qualifying
Revenues |
Section
2.6(d)(viii) |
|
Related
Person |
Section
3.6(a)(i) |
|
Restricted
Period |
Section
7.10(a) |
|
Revised
Client Revenue Schedule |
Section
2.2(a) |
|
Rule
00x-0 Xxxxx |
Xxxxxxx
3.18(d) |
|
Second
Contingent Payment |
Section
2.6(d)(ii) |
|
Second
Preliminary Statement |
Section
2.7(c) |
|
Series
A Preferred Stock |
Recitals |
|
Shareholders |
Preamble |
|
Shareholders’
Representative |
Section
12.13(a) |
|
Shares |
Recitals |
|
Straddle
Period |
Section
10.3 |
|
Subsidiary
Securities |
Section
3.3(b) |
|
Target
Working Capital |
Section
2.5(a) |
|
Taxes
|
Section
3.8(a) |
|
Third
Contingent Payment |
Section
2.6(d)(iii) |
|
Third
Party Interests |
Section
3.3(c) |
|
Third
Preliminary Statement |
Section
2.7(c) |
|
Trigger
Event |
Section
2.8(a)(i) |
|
Warranty
Breach |
Section
9.2(a)(i) |
ARTICLE
II.
PURCHASE
AND SALE
Section
2.1. Purchase
and Sale of the Shares. Upon
the terms and subject to the conditions of this Agreement, the Shareholders
agree to sell to the Buyer, and the Buyer agrees to purchase from the
Shareholders, the Shares at the Closing. The purchase price for the Shares is
$20,000,000 less the
Closing Revenue Adjustment Amount (as calculated by the Company in accordance
with Section 2.2(a)) (the amount equal to that difference, the “Purchase
Price”). The
Buyer shall pay the Purchase Price as provided in Section 2.3, and the Purchase
Price is subject to adjustment as provided in Sections 2.2(b), 2.5, 2.6, 2.7 and
2.8.
Section
2.2. Closing
Revenue Adjustment.
(a) Two
Business Days prior to the Closing Date, the Company shall deliver to the Buyer
a revised version of Schedule
3.6(a) (the
“Revised
Client Account Revenue Schedule”) that
identifies (i) each Lost Client Account, (ii) each Retained Client Account,
(iii) each New Client Account and (iv) the Closing Revenue Ratio. If the Closing
Revenue Ratio is less than 0.95, then the Company shall include on the Revised
Client Revenue Schedule (and based on the information set forth therein) its
calculation of the Closing Revenue Adjustment Amount.
(b) If the
Buyer disagrees with any information set forth in the Revised Client Revenue
Schedule, it will so notify the Shareholders’ Representative no later than 30
days after the Closing and specify the items as to which the Buyer disagrees and
provide to Shareholders’ Representative the Buyer’s calculation of the Closing
Revenue Adjustment Amount (“Buyer’s
Revenue Adjustment Amount”). If
the Buyer and Shareholders’ Representative are not able to resolve the disputed
items within 15 days thereafter, then they shall refer the disputed items to an
independent accounting firm of nationally recognized standing mutually
acceptable to the Buyer
and the
Shareholders’ Representative (any such firm selected under this Section 2.2(b)
or under Section 2.4 or 2.7, an “Accounting
Referee”). The
Accounting Referee must consider only the disputed items and must deliver to the
Buyer and the Shareholders’ Representative as soon as practicable, but in any
event within 45 days, a report setting forth its calculation of the Closing
Revenue Adjustment Amount; provided that the
amount calculated by the Accounting Referee must not be greater than the Buyer’s
Revenue Adjustment Amount or less than the amount of the Closing Revenue
Adjustment Amount calculated by the Company and set forth on the Revised Client
Revenue Schedule. The determination of the Accounting Referee will be binding
upon the Buyer and the Principals. The cost of such review and report will be
borne (i) by the Principals, if the difference between the Final Closing Revenue
Adjustment Amount (as defined below in this Section 2.2(b)) and the Closing
Revenue Adjustment Amount set forth in the Revised Client Revenue Schedule is
greater than the difference between the Final Closing Revenue Adjustment Amount
and Buyer’s Revenue Adjustment Amount, (ii) by the Buyer if the first such
difference is less than the second such difference and (iii) otherwise equally
by the Buyer and the Principals. “Final
Closing Revenue Adjustment Amount” means
(A) the Closing Revenue Adjustment Amount as set forth in the Revised Client
Revenue Schedule, if no notice of disagreement is delivered by the Buyer
pursuant to this Section 2.2(b) or (B) if such a notice of disagreement is
delivered, (1) as agreed by the Buyer and the Shareholders’ Representative
pursuant to this Section 2.2(b) or (2) in the absence of such agreement, the
Closing Revenue Adjustment Amount as calculated by the Accounting
Referee.
(c) If the
Final Closing Revenue Adjustment Amount is greater than the amount of the
Closing Revenue Adjustment Amount as set forth in the Revised Client Revenue
Schedule, then the Principals shall pay to the Buyer, as an adjustment to the
Purchase Price, the amount of such excess in the manner provided and with
interest as set forth in Section 2.5(b).
Section
2.3. Closing. Subject
to Section 11.1, the closing of the purchase and sale of the Shares hereunder
(the “Closing”) shall
take place at the offices of Xxxxxxx Procter LLP, Exchange Place, 00 Xxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, as soon as possible, but in no event later
than 5 Business Days, after satisfaction of the conditions set forth in Article
VIII, or at such other time or place as the Buyer and the Shareholders’
Representative may agree. At the Closing:
(a) The Buyer
shall deliver to the Shareholders, in accordance with the allocations set forth
on Schedule
2.3(a), cash in
an aggregate amount equal to $20,000,000 less the
Closing Revenue Adjustment Amount, if any (as calculated by the Company under
Section 2.2(a)), in each case in immediately available funds by wire transfer to
accounts of the Shareholders designated by the Principals in written notices to
the Buyer not later than two Business Days prior to the Closing Date. If the
Principals do not deliver those notices, then the Buyer may make the payments
required under this Section 2.3(a) by certified or official bank check payable
in immediately available funds; and
(b) The
Shareholders shall deliver to Buyer valid title to the Shares, free and clear of
any Encumbrances and any other limitation or restriction (including any right to
vote, sell or otherwise dispose of the Shares), together with certificates for
the Shares duly endorsed or accompanied by stock powers duly endorsed in blank,
with any required transfer stamps affixed thereto.
Section
2.4. Closing
Balance Sheet.
(a) As
promptly as practicable, but no later than 60 days, after the Closing Date, the
Buyer will cause to be prepared and delivered to the Shareholders’
Representative a consolidated balance sheet of the Company and its Subsidiaries
as of the close of business on the Closing Date (the “Closing
Balance Sheet”), and a
certificate based on the Closing Balance Sheet setting forth the Buyer’s
calculation of Closing Working Capital. The Closing Balance Sheet will (i)
fairly present the consolidated financial position of the Company and the
Subsidiaries as at the close of business on the Closing Date (without giving
effect to the transactions contemplated by this Agreement other than the Real
Estate Separation and the contribution of the shares of capital stock of Park to
the Company) in accordance with GAAP, (ii) include line items substantially
consistent with those in the Base Balance Sheet; and (iii) be prepared in
accordance with accounting policies and practices consistent with those used in
the preparation of the Base Balance Sheet, but in all instances in accordance
with GAAP. “Closing
Working Capital” means the
excess of the consolidated current assets over the consolidated current
liabilities of the Company and the Subsidiaries (which current liabilities, for
the avoidance of doubt, will include an accrual for all unpaid fees, costs,
expenses and Taxes incurred or to be incurred by the Company and its
Subsidiaries in connection with the transactions contemplated by this Agreement,
including to the extent applicable, any such costs and expenses relating to the
Special Transaction Bonus that is identified and described in Schedule
3.22), in
each case as shown on the Closing Balance Sheet,
plus, except
to the extent reflected in the Closing Balance Sheet, any Unbooked Brokerage
Commissions actually received by the Company in the 30 days following the
Closing, up to a maximum of $60,000.
(b) If the
Shareholders’ Representative disagrees with the Buyer’s calculation of Closing
Working Capital delivered pursuant to Section 2.4(a), the Shareholders’
Representative may, within 15 days after delivery of the documents referred to
in Section 2.4(a), deliver a notice to the Buyer disagreeing with such
calculation and setting forth the Shareholders’ Representative’s calculation of
such amount. Any such notice of disagreement shall specify those items or
amounts as to which the Shareholders’ Representative disagrees, and the
Shareholders’ Representative shall be deemed to have agreed with all other items
and amounts contained in the Closing Balance Sheet and the calculation of
Closing Working Capital delivered pursuant to Section 2.4(a).
(c) If a
notice of disagreement shall be duly delivered pursuant to Section 2.4(b), the
Buyer and the Shareholders’ Representative shall, during the 15 days following
such delivery, use their reasonable best efforts to reach agreement on the
disputed items or amounts in order to determine, as may be required, the amount
of Closing Working Capital, which amount shall not be less than the amount
thereof shown in the Buyer’s calculations delivered pursuant to Section 2.4(a)
nor more than the amount thereof shown in the Shareholders’ Representative’s
calculation delivered pursuant to Section 2.4(b). If, during such period, the
Buyer and the Shareholders’ Representative are unable to reach such agreement,
they shall promptly thereafter cause an Accounting Referee (as defined in
Section 2.2(b)) promptly to review this Agreement and the disputed items or
amounts for the purpose of calculating Closing Working Capital. In making such
calculation, the Accounting Referee must consider only those items or amounts in
the Closing Balance Sheet or the Buyer’s calculation of Closing Working Capital
as to which the Shareholders’ Representative has disagreed. The Accounting
Referee shall deliver to the Buyer
and the
Shareholders’ Representative, as promptly as practicable, a report setting forth
such calculation. The report is to be final and binding upon the Buyer and the
Principals. The cost of such review and report shall be borne (i) by the Buyer
if the difference between Final Working Capital (as defined in Section 2.5(a))
and the Buyer’s calculation of Closing Working Capital delivered pursuant to
Section 2.4(a) is greater than the difference between Final Working Capital and
the Shareholders’ Representative’s calculation of Closing Working Capital
delivered pursuant to Section 2.4(b), (ii) by the Principals if the first such
difference is less than the second such difference and (iii) otherwise equally
by the Buyer and the Principals.
(d) The Buyer
and the Shareholders’ Representative agree that they shall, and agree to cause
the Company and each Subsidiary of the Company to, cooperate and assist in the
preparation of the Closing Balance Sheet and the calculation of Closing Working
Capital and in the conduct of the audits and reviews referred to in this Section
2.4, including by making available, to the extent necessary, books, records,
work papers and personnel.
Section
2.5. Adjustment
to the Purchase Price.
(a) If Target
Working Capital exceeds Final Working Capital, the Principals shall pay to the
Buyer, as an adjustment to the Purchase Price, in the manner and with interest
as provided in Section 2.5(b), the amount of such excess. If Final Working
Capital exceeds Target Working Capital, the Buyer shall pay to the Shareholders,
in the manner and with interest as provided in Section 2.5(b), the amount of
such excess. “Target
Working Capital” means
$450,000. “Final
Working Capital” means
Closing Working Capital (i) as shown in the Buyer’s calculation delivered
pursuant to Section 2.4(a), if no notice of disagreement with respect thereto is
duly delivered pursuant to Section 2.4(b); or (ii) if such a notice of
disagreement is delivered, (A) as agreed by the Buyer and the Shareholders’
Representative pursuant to Section 2.4(c) or (B) in the absence of such
agreement, as shown in the Accounting Referee’s calculation delivered pursuant
to Section 2.4(c); provided
that in
no event shall Final Working Capital be less than the Buyer’s calculation of
Closing Working Capital delivered pursuant to Section 2.4(a) or more than the
Shareholders’ Representative’s calculation of Closing Working Capital delivered
pursuant to Section 2.4(b).
(b) Any
payment pursuant to Section 2.5(a) shall be made within 10 days after Final
Working Capital has been determined, by delivery by the Buyer or the Principals,
as the case may be, of a certified or official bank check payable in immediately
available funds or by causing such payments to be credited to such account, as
may be designated by the parties receiving any such payments. The amount of any
payment to be made pursuant to this Section 2.5 shall bear interest from and
including the Closing Date to but excluding the date of payment at a rate per
annum equal to the Prime Rate as published in the Wall
Street Journal, Eastern Edition (the
“Prime
Rate”) in
effect from time to time during the period from the Closing Date to the date of
payment. The interest is payable at the same time as the payment to which it
relates and is to be calculated daily on the basis of a year of 365 days and the
actual number of days elapsed.
Section
2.6. Contingent
Payments.
(a) On or
before the earlier of (i) 15 Business Days after the date the Buyer files with
the SEC its annual report on Form 10-K for the fiscal year ending December 31,
2006, and (ii) April 15, 2007, the Buyer shall pay to the Shareholders an
aggregate amount in cash equal to the First Contingent Payment.
(b) On or
before the earlier of (i) 15 Business Days after the date the Buyer files with
the SEC its annual report on Form 10-K for the fiscal year ending December 31,
2007, and (ii) April 15, 2008, the Buyer shall pay to the Shareholders an
aggregate amount in cash equal to the Second Contingent Payment.
(c) On or
before the earlier of (i) 15 Business Days after the date the Buyer files with
the SEC its annual report on Form 10-K for the fiscal year ending December 31,
2008, and (ii) April 15, 2009, the Buyer shall pay to the Shareholders an
aggregate amount in cash equal to the Third Contingent Payment.
(d) For
purposes of Sections 2.6, 2.7 and 2.8, the following terms have the following
meanings:
(i) “First
Contingent Payment” means
an amount based on 2006 EBITDA determined according to the table and principles
set forth in Schedule
2.6;
provided that in no event will the First Contingent payment be less than
$2,000,000.
(ii) “Second
Contingent Payment” means
an amount based on 2007 EBITDA determined according to the table and principles
set forth in Schedule
2.6;
provided that in no event will the Second Contingent Payment be less than
$2,000,000.
(iii) “Third
Contingent Payment” means
an amount based on 2008 EBITDA determined according to the table and principles
set forth in Schedule
2.6;
provided that in
no event will the Third Contingent Payment be less than $2,000,000.
(iv) “2006
EBITDA” means
EBITDA for the fiscal year ending December 31, 2006.
(v) “2007
EBITDA” means
EBITDA for the fiscal year ending December 31, 2007.
(vi) “2008
EBITDA” means
EBITDA for the fiscal year ending December 31, 2008.
(vii) “EBITDA” means,
with respect to a specific time period, the excess of Qualifying Revenues over
Expenses.
(viii) “Qualifying
Revenues” means,
with respect to a specified time period, that portion of the consolidated
revenues of the Acquired Business (as determined in accordance with GAAP applied
on a consistent basis) that are generated by the Acquired Business during that
period from Investment Management Services, Insurance Services and Brokerage
Services (regardless of where in the Combined Buyer Group they are
generated).
(ix) “Expenses” means,
with respect to a specific time period, all consolidated expenses, costs and
charges of any nature (as determined on an accrual basis in accordance with GAAP
applied on a consistent basis) of the Acquired Business (regardless of where in
the Combined Buyer Group they are incurred) including (A) any incentive
compensation, profit sharing or bonus expense payable to persons employed by a
member of the Combined Buyer Group in connection with the Acquired Business
(including, to the extent required by GAAP, expenses relating to the granting of
stock options or other equity instruments), but excluding (B) (1) the payment of
interest expense on indebtedness for borrowed money, (2) the payment of federal,
state, local and foreign taxes based on or measured by gross or net income, (3)
the effect of any depreciation or amortization with respect to any property or
assets of the Acquired Business and (4) any amount paid to any Principal as
severance and any amount paid for the continuation of that Principal’s health
and dental benefits following the termination of that Principal’s employment
with the Company by the Company without cause or by the Principal for good
reason under his employment agreement with the Company that is then in effect;
provided
further that
Expenses shall not include any allocation to the Acquired Business of general
corporate or administrative costs or other similar overhead costs of the Buyer
and its Affiliates, except to the extent they represent costs actually incurred
by the Buyer and its Affiliates in connection with services or expenses
requested by, or undertaken for the benefit of, the Acquired Business, including
services or expenses that are jointly requested by, or undertaken for the joint
benefit of, the Acquired Business and other businesses of the Buyer and its
Affiliates, in which case there shall be allocated to the Acquired Business its
proportionate share of those costs.
(e) During
the period commencing on the Closing Date and ending at the close of business on
December 31, 2008 (the “Earnout
Period”),
without the mutual written consent of the Parent and the Shareholders’
Representative, no member of the Combined Buyer Group may effect (i) any
transfer or partial transfer to or from any other member of the Combined Buyer
Group of, or (ii) any internal reorganization or partial reorganization of the
Combined Buyer Group relating to, any client or customer account (or any assets
therein or services with respect thereto) or business division, product or
service of the Acquired Business or of the Buyer and its Affiliates, as the case
may be, in each case that existed prior to the Closing (any such transfer or
reorganization, an “Existing-Business
Transfer”).
Section
2.7. Calculation
of Contingent Payments.
(a) At the
time of the payment of the First Contingent Payment, the Buyer shall deliver to
the Shareholders’ Representative a statement setting forth the Buyer’s
calculation of 2006 EBITDA (the “Preliminary
Statement”). If
the Shareholders’ Representative disagrees with any item or amount contained in
the Preliminary Statement or with the Buyer’s calculation of 2006 EBITDA set
forth therein, the Shareholders’ Representative may, within 15 days after
delivery of the Preliminary Statement, deliver a notice to the Buyer disagreeing
with such calculation and setting forth the Shareholders’ Representative’s
calculation of 2006 EBITDA. Any notice of disagreement shall specify those items
or amounts as to which the Shareholders’ Representative disagrees, and the
Shareholders’ Representative will be deemed to have agreed with all other items
and amounts. If the Buyer and the Shareholders’ Representative are not able to
resolve such dispute within 15 days after the delivery of such notice, they
shall promptly
thereafter
cause an Accounting Referee (as defined in Section 2.2(b)) to review this
Agreement and the disputed items or amounts for the purpose of calculating 2006
EBITDA. The Accounting Referee shall deliver to the Buyer and the Shareholders’
Representative, as promptly as practicable, a report setting forth such
calculation, which amount shall not be less than the Buyer’s calculation of 2006
EBITDA as set forth in the Preliminary Statement or more than the Shareholders’
Representative’s calculation of 2006 EBITDA delivered pursuant to
Section 2.7(a). That report shall be final and binding upon the Buyer and
the Principals. The cost of such review and report shall be paid (i) by the
Buyer if the difference between Final 2006 EBITDA (as defined in Section 2.7(b))
and the Buyer’s calculation of 2006 EBITDA as set forth in the Preliminary
Statement is greater than the difference between Final 2006 EBITDA and the
Shareholders’ Representative’s calculation of 2006 EBITDA delivered pursuant to
this Section 2.7(a), (ii) by the Principals, if the first such
difference is less than the second such difference and (iii) otherwise equally
by the Buyer and the Principals.
(b) If the
Buyer’s calculation of 2006 EBITDA as set forth in the Preliminary Statement was
less than Final 2006 EBITDA, then the Buyer shall pay to the Shareholders an
amount equal to the excess of (i) the amount that would have been paid as the
First Contingent Payment if the Buyer had based its calculation of the First
Contingent Payment on an amount equal to Final 2006 EBITDA over (ii) the amount
paid by the Buyer as the First Contingent Payment under Section 2.6(a);
provided that in
no event will any interest be incurred on any such excess. As used herein,
“Final
2006 EBITDA” means
2006 EBITDA (A) as shown in the Preliminary Statement, if no notice of
disagreement with respect thereto is duly delivered pursuant to Section 2.7(a);
or (B) if such a notice of disagreement is delivered, (1) as agreed by the Buyer
and the Shareholders’ Representative pursuant to Section 2.7(a) or (2) in the
absence of such agreement, as shown in the Accounting Referee’s calculation
delivered pursuant to Section 2.7(a); provided
that in
no event shall Final 2006 EBITDA be less than the amount as shown in the
Preliminary Statement or more than the Shareholders’ Representative’s
calculation in the notice of disagreement delivered pursuant to Section
2.7(a).
(c) At the
time of the payment of the Second Contingent Payment and the Third Contingent
Payment, the Buyer shall deliver to the Shareholders’ Representative a statement
setting forth the Buyer’s respective calculations of 2007 EBITDA and 2008 EBITDA
(those statements, the “Second
Preliminary Statement” and the
“Third
Preliminary Statement”). If
the Shareholders’ Representative disagrees with any item or amount contained in
the Second Preliminary Statement or the Third Preliminary Statement or with the
Buyer’s calculation of 2007 EBITDA or 2008 EBITDA, then, in each case the
Shareholders’ Representative may, within 15 days after delivery of the Secondary
Preliminary Statement or the Third Preliminary Statement, as applicable, deliver
a notice to the Buyer disagreeing with the applicable calculation and setting
forth the Shareholders’ Representative’s calculation of 2007 EBITDA or 2008
EBITDA, as applicable. Upon delivery of such a notice, all matters in dispute
shall be resolved in a manner consistent with the process described in Sections
2.7(a) and 2.7(b) with respect to 2006 EBITDA and the Preliminary
Statement.
Section
2.8. Acceleration
of Contingent Payments.
(a) If at any
time during the Earnout Period:
(i) the Buyer
consummates (A) a merger or consolidation of the Acquired Business with or into
another Person pursuant to which, immediately following the consolidation or
merger, a majority of the outstanding voting power of the surviving or
consolidated Person is owned by a Person other than the Buyer or one or more of
its Affiliates or (B) the sale, of all or substantially all of the properties
and assets of the Acquired Business to any Person other than the Buyer or one or
more of its Affiliates;
(ii) the Buyer
or one or more of its Affiliates consummates the sale of a majority of the
voting power of the Acquired Business to Persons other than the Buyer or one or
more of its Affiliates; or
(iii) the Buyer
or one or more of its Affiliates terminates all or substantially all of the
business operations of the Acquired Business relating to Investment Management
Services, Brokerage Services and Insurance Services, taken as a whole, and does
not then cause the Acquired Business to provide any products or services that
are comparable to the terminated business operations (any of the events
described by clauses (i), (ii) or (iii) of this Section 2.8(a), a “Trigger
Event”);
(b) then the
Buyer shall immediately (and, in any event, within five Business Days) (A)
deliver to the Shareholders’ Representative a report setting forth a reasonably
detailed calculation of the present discounted value of all Contingent Payments
that, at the time of the occurrence of Trigger Event, the Principals have not
already received or with respect to which the rights of the Principals have not
otherwise lapsed (those Contingent Payments, the “Open
Contingent Payments”) and
(B) pay to the Principals an aggregate amount in cash equal to that value.
For
purposes of this Section 2.8(a), the present discounted value of the Open
Contingent Payments will be as determined in good faith by the Buyer, taking
into account (1) the time remaining in the Earnout Period at the time of the
Trigger Event, (2) EBITDA between the Closing Date and the date of the Trigger
Event and (3) projected EBITDA between the date of the Trigger Event and the end
of the Earnout Period, based on (x) good faith projections of Qualifying
Revenues for that period and (y) an assumption that the ratio of EBITDA to
Qualifying Revenues for that period will equal the ratio of EBITDA to
Qualifying Revenues for the period between the Closing Date and the date of the
Trigger Event and (4) a discount rate equal to the Prime Rate.
(c) If the
Shareholders’ Representative disagrees with the Buyer’s calculation of the
present discounted value of the Open Contingent Payments delivered pursuant to
Section 2.8(a), the Shareholders’ Representative may, within 10 days after
delivery of the report referred to in Section 2.8(a), deliver a notice to the
Buyer disagreeing with that calculation and requesting that the Buyer engage an
independent investment banking firm of nationally recognized standing that is
reasonably acceptable to the Shareholders’ Representative. Within 10 days of its
engagement, the investment banking firm must deliver a report setting forth a
calculation of the present discounted value of the Open Contingent Payments that
incorporates the principles set forth in Section 2.8(a) that will be final and
binding upon all of the parties. If the investment banking firm’s calculation is
greater than the amount the Buyer paid to the Principals pursuant to
Section
2.8(a), the Buyer shall pay to the Shareholders an aggregate amount in cash
equal to the excess.
Section
2.9. Payment
Procedures. The
Buyer shall make any payment due to the Shareholders under Section 2.6, 2.7 or
2.8 in accordance with the allocations set forth on Schedule
2.3(a), in each
case in immediately available funds by wire transfer to accounts of the
Principals designated by the Shareholders in written notices not later than two
Business Days prior to the anticipated payment date. If the Principals do not
deliver those notices, then the Buyer may make any such payment by certified or
official bank check payable in immediately available funds. Any payment made by
the Buyer under Section 2.6, 2.7 or 2.8 is to be treated as an adjustment to the
Purchase Price.
Section
2.10. Setoff. The
Buyer may set off (a) the amount of any Damages (as defined in Section 8.2(a))
for which it or any other Buyer Indemnified Party (as defined in Section 8.2(a))
is entitled to indemnification under Section 9.2 and (b) any other amounts to
which it may be entitled under this Agreement, including under Sections 2.2(c),
2.5(a) or 9.2, against any amounts otherwise owed by the Buyer to the
Shareholders with respect Contingent Payments under Sections 2.6, 2.7 or
2.8.
Section
2.11. Spinout
of Real Estate Partnerships and Subsidiaries. Prior
to the Closing the Company shall complete the Real Estate Separation and shall
take such other actions as may be necessary or appropriate to divest itself of
all interests, direct or indirect, that the Company may have in the Real Estate
Partnerships. Within 15 Business Days of the Closing Date, the Principals shall
(i) prepare and obtain all necessary corporate or similar authorizations to
change the corporate and partnership names of the Real Estate Subsidiaries and
Real Estate Partnerships to names that do not contain the name “Weston” and (ii)
deliver to the Buyer copies of any applicable certificates of amendment to the
articles of organization or certificates of partnership of the Real Estate
Subsidiaries and Real Estate Partnerships filed in connection with those name
changes, in each case certified by the secretaries of state of the respective
jurisdictions in which those entities are organized.
Section
2.12. Park
Insurance Agency. Prior
to the Closing each Principal who holds shares of capital stock of Park shall
contribute such shares to the Company so that at the Closing Park will be a
wholly owned subsidiary of the Company. At the Closing, any Principal who is
entitled to receive any commissions or similar payments with respect to
insurance policies sold by Park or such Principal shall assign all of such
Principal’s rights with respect to such payments to Park.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
AND THE
PRINCIPALS
As a
material inducement to the Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, the Company and the Principals, jointly and
severally, make
to the
Buyer, as of the date hereof and as of the Closing, the representations and
warranties set forth in this Article III.
Section
3.1. Organization
and Qualification of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts, and has all necessary power
and authority to own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased or such
business is currently conducted. A copy of the Company’s articles of
organization, as amended to date, certified by the Secretary of State of the
Commonwealth of Massachusetts (the “Charter”), and
by-laws, as amended to date, certified by the clerk of the Company (the
“By-laws,” and
together with the Charter, the “Company
Organizational Documents”), all
of which were heretofore delivered to the Buyer’s counsel, are complete and
correct, and no amendments thereto are pending. The Company is not in violation
of any term of the Company Organizational Documents. The Company is duly
qualified to do business as a foreign corporation under the laws of each
jurisdiction in which the nature of its business, activities or other contacts
in that jurisdiction or the ownership or leasing of its properties requires such
qualification, except where the failure to be so licensed or qualified could not
reasonably be expected to have a Material Adverse Effect.
Section
3.2. Capitalization;
Beneficial Ownership.
(a) The
authorized capital stock of the Company consists of (i) 1,500,000 shares of
Common Stock, of which 1,399,998 shares are issued and outstanding, (ii)
3,000,000 shares of Class AA Stock, of which 800 shares are issued and
outstanding and (iii) 2,000 shares of Series A Preferred Stock, of which 375
shares are issued and outstanding. As of the Closing, the only issued and
outstanding shares of capital stock of the Company will be the
Shares.
(b) All
outstanding shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable. Except as set forth in
Section 3.2(a), there are no outstanding (i) shares of capital stock or voting
securities of the Company, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
(iii) options, warrants or other rights to acquire from the Company, or any
other obligation of the Company to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of the Company or (iv) stock appreciation, phantom stock, profit
participation or similar rights with respect to shares of capital stock or
voting securities of the Company (the items in Sections 3.2(b)(i) through
3.2(b)(iv) being referred to collectively as “Company
Securities”). There are
no, and in the last ten (10) years there have not been any, obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any Company Securities.
(c) As of the
date hereof, the Principals and the Other Shareholders own beneficially and of
record the Common Shares and Other Shares, as applicable, set forth opposite
their names on Schedule
3.2(c), free
and clear of any Encumbrances and any other limitation or restriction (including
any restriction on the right to vote, sell or otherwise dispose of the Company
Shares). At the Closing, the Principals shall transfer and deliver to the Buyer
valid title to the Shares free and clear of any Encumbrances and any such
limitation or restriction.
Section
3.3. Subsidiaries
and Investments.
(a) Schedule
3.3(a) contains a
complete and accurate list of each Subsidiary of the Company. Each Subsidiary of
the Company is a corporation duly authorized and validly existing in the laws of
the state of its incorporation, with all necessary power and authority to own or
lease its properties and to conduct its business in the manner and in the places
where such properties are owned or leased or such business is currently
conducted. Copies of the charter, bylaws and similar organization documents for
each Subsidiary of the Company, all of which were heretofore delivered to the
Buyer’s counsel, are complete and correct, and no amendments thereto are
pending. Each Subsidiary is duly qualified to do business as a foreign
corporation under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification, except where the failure to be so licensed or qualified could not
reasonably be expected to have a material adverse effect on that
Subsidiary.
(b) All of
the outstanding capital
stock or other voting securities of each Subsidiary is owned by the Company,
directly or indirectly, free and clear of any Encumbrances and free of any other
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or any other voting securities).
There are no outstanding (i) securities of the Company or any Subsidiary
convertible into or exchangeable for shares of capital stock or voting
securities of any Subsidiary, (ii) options, warrants or other rights to acquire
from the Company or any Subsidiary, or other obligation of the Company or any
Subsidiary to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of any
Subsidiary or (iii) stock appreciation, phantom stock, profit participation or
similar rights with respect to shares of capital stock or voting securities of
any Subsidiary (the items in Sections 3.3(c)(i) through 3.3(c)(iii) being
referred to collectively as “Subsidiary
Securities”). There are
no, and in the past ten (10) years there have not been any, obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any
outstanding Subsidiary Securities.
(c) Except
for the Subsidiaries of the Company or as set forth on Schedule 3.3(c), neither
the Company nor any of
its Subsidiaries owns, directly or indirectly, any shares of capital stock,
other securities or ownership interests or investment in any other Person
(collectively, “Third
Party Interests”).
Schedule
3.3(c) sets
forth a complete description of each Third Party Interest, including the name of
each record and beneficial owner of the Third Party Interest, its percentage
interest with respect to the Person to which the Third Party Interest relates
and any voting or similar rights with respect thereto. Except as expressly
provided in the contracts listed on Schedule
3.3(c), neither
the Company nor any of its Subsidiaries have any rights to, or are bound by any
commitment or obligation to, acquire by any means, directly or indirectly, any
Third Party Interests or make any further investment in, or contribution or
advance with respect to, any Third Party Interest or to any other Person. Except
as expressly provided in the contracts listed on Schedule
3.3(c), neither
the Company nor any of its Subsidiaries has any obligation (whether as
guarantor, controlling person or otherwise) for the present, future or
contingent liabilities or obligations of any Person set forth (or required to be
set forth) on Schedule
3.3(c).
Section
3.4. Authority;
No Violation by the Company.
(a) The
Company has full right, authority and power to enter into this Agreement and
each agreement, document and
instrument to be executed and delivered by the Company pursuant to, or as
contemplated by, this Agreement and to carry out the transactions contemplated
hereby and thereby. The execution, delivery and performance by the Company of
this Agreement and each such other agreement, document and instrument have been
duly authorized by all necessary action of the Company and its shareholders, and
no other action on the part of the Company, any Subsidiary of the Company or any
shareholder of the Company is required in connection therewith. No Other
Shareholder has objected to any of the transactions contemplated hereby. This
Agreement and each agreement, document and instrument executed and delivered by
the Company pursuant to, or as contemplated by, this Agreement constitutes, or
when executed and delivered will constitute, valid and binding obligations of
the Company enforceable against it in accordance with their terms, except as
enforceability may be restricted, limited or delayed by applicable bankruptcy or
other laws affecting creditors’ rights generally or by equitable principles. The
execution, delivery and performance by the Company of this Agreement and each
such other agreement, document and instrument and consummation of the
transactions contemplated hereby and thereby:
(i) does not
and will not violate any provision of the Company Organizational Documents, any
of the Mutual Fund Governing Documents or the Representation Agreements, in each
case as amended to date;
(ii) does not
and will not violate any Applicable Laws or require the Company, any of its
Subsidiaries or any Mutual Fund to obtain any approval, consent or waiver of, or
make any filing with, any Person or Governmental Authority, except as provided
for elsewhere in this Agreement regarding the Mutual Funds or as specifically
identified on Schedule 3.4 hereto,
which approvals, consents and waivers identified in such Schedule will, when
obtained as of the Closing, conform in all material respects to, and otherwise
satisfy in all material respects, all Applicable Laws; and
(iii) except as
specifically identified on Schedule 3.4 hereto,
does not and will not result in a breach of, constitute a default under,
accelerate any obligation under, or give rise to a right of termination of, any
agreement, contract, instrument, mortgage, lien, lease, permit, authorization,
order, writ, judgment, injunction, decree, determination or arbitration award to
which the Company, any of its Subsidiaries or any of the Mutual Funds is a party
or by which the property of the Company, any of its Subsidiaries or any of the
Mutual Funds is bound or affected, or result in the creation or imposition of
any mortgage, pledge, lien, security interest or other charge or encumbrance on
(A) any of assets of the Company, any of its Subsidiaries or any of the Mutual
Funds or (B) any Person’s interest in the Company, any of its Subsidiaries or
any of the Mutual Funds.
Section
3.5. Real
and Personal Property.
(a) Neither
the Company nor any
of its Subsidiaries owns, or has at any time, owned, directly or indirectly, any
interest in real property. All of the real property leased by the Company and
its Subsidiaries is identified on Schedule 3.5(a) (the
“Leased
Real Property”). All
leases with respect to the Leased Real Property are identified on Schedule 3.5(a) (the
“Leases”),
and true
and complete copies thereof have been delivered to Buyer. Each of the Leases has
been duly authorized and executed by the parties thereto and is in full force
and effect. Neither the Company nor any of its Subsidiaries is in default under
any of the Leases, and no event has occurred that, with notice or the passage of
time, or both, would give rise to such a default. To the Company’s knowledge,
none of the other parties to any of the Leases is in default thereunder and
there is no event that, with notice or the passage of time, or both, would give
rise to such a default. The Company is not aware of any reason why any Lease
would be terminated other than upon the expiration of the current term described
therein. There is no pending or, to the Company’s knowledge, contemplated or
threatened condemnation of any of the Leased Real Property or any part thereof.
Except as set forth on Schedule 3.5(a), to the
Company’s knowledge, none of the Leased Real Property, the buildings,
structures, facilities, fixtures or other improvements thereon, or the use
thereof, contravenes or violates the terms of any Lease or any material
building, zoning, fire protection, administrative, occupational safety and
health or other applicable law, rule or regulation.
(b) Except as
set forth on Schedule
3.5(b), the
Company and its Subsidiaries own good and marketable title to, or, in the case
of leased property or assets, have valid leasehold interest in, all of the
property and assets reflected in the Base Balance Sheet (as defined in Section
3.7(c)) or acquired after the Balance Sheet Date (as defined in Section 3.7(c)),
in each case free and clear of all
Encumbrances other than Permitted Encumbrances. There are no developments
affecting any such property or assets pending or, to the knowledge of the
Company threatened, that might materially detract from the value, materially
interfere with any present or intended use or materially adversely affect the
marketability of any such property or assets. Except as disclosed on
Schedule
3.5(b), the
property, assets and rights owned by the Company and its Subsidiaries constitute
all of the property, assets and rights used or held for use in connection with
the businesses of the Company and its Subsidiaries and are sufficient to conduct
those businesses as currently conducted and as planned to be conducted following
the Closing.
Section
3.6. Clients
and Client Accounts.
(a) Schedule
3.6(a) is a
list as of the Base Date of all Client Accounts and all Mutual Funds, setting
forth with respect to each Client Account or Mutual Fund, as the case may
be:
(i) (A) in
the case of a Client Account, the name of each Client that is (x) a Shareholder
or a director, officer or employee of the Company or any of its Subsidiaries,
(y) an Immediate Family member or Affiliate of any of the Persons described in
clause (x), or (z) a trust or collective investment vehicle in which any of the
Persons described in clause (x) or (y) is a holder of a beneficial interest (any
of those Persons described in clause (x), (y) or (z), a “Related
Person”), and
(B) in the case of the Mutual Funds, the name of the Mutual Fund and any Related
Person who had an investment in the Mutual Fund as of the Base
Date;
(ii) the state
(or, if the Client is not a U.S. citizen, the country) of which the Client is a
citizen or resident (in the case of individuals) or domiciled (in the case of
entities);
(iii) the Base
Date Account Value, Applicable Rate and Annual Investment Advisory Revenue for
that Client Account or Mutual Fund.
(b) Each
Client (other than the Mutual Funds, which have entered into advisory agreements
with the Company that are listed on Schedule
3.18(b)) has
entered into an Advisory Contract with the Company with respect to each Client
Account owned by such Client in each case containing the terms and conditions of
one of the forms of agreement attached as Exhibit
3.6. All
Client Account assets which are subject to Advisory
Contracts are managed by one of the fifteen Managers listed on Schedule
3.6(a) hereto.
As of the date hereof, except as set forth in Schedule
3.6(b) and
expressly described thereon, there are no contracts, agreements, arrangements or
understandings pursuant to which the Company, any of its Subsidiaries, or any of
their respective officers, employees, or other representatives including the
Principals has undertaken or agreed to cap, waive, offset, reimburse or
otherwise reduce any or all fees or charges payable by or with respect to any of
the Clients or pursuant to any Advisory Contract. As of the date hereof, except
as set forth in Schedule
3.6(b), no
Client or, in the case of the Mutual Funds, any underlying shareholder therein,
as applicable, has notified or otherwise communicated to the Company or any of
the Principals regarding an intention to terminate or reduce its business
relationship with the Company, or adjust the fee schedule with respect to any
Advisory Contract in a manner that would reduce the fees of the Company or any
of its Subsidiaries in connection with such Client relationship.
(c) Except
for the Advisory Contracts between the Company and the Mutual Funds, none of the
Advisory Contracts will terminate according to its terms or as a result of any
provisions of Applicable Law in connection with the transactions contemplated by
this Agreement.
(d) Neither
the Company nor any of its Subsidiaries has any clients or customers with
respect to which fees payable to the Company or any of its Subsidiaries are
based on performance or otherwise provide for compensation on the basis of a
share of capital gains or appreciation in respect of the funds (or any portion
thereof) of any client or customer.
(e) Except as
disclosed in Schedule
3.6(e), the
Company does not provide Investment Management Services through (i) any issuer
or other Person that is an investment company (within the meaning of the
Investment Company Act), (ii) any issuer or other Person that would be an
investment company (within the meaning of the Investment Company Act) but for
the exemptions contained in the Investment Company Act, or (iii) any issuer or
other Person that is not required to be registered under the laws of the
appropriate securities regulatory authority in the jurisdiction in which the
issuer or other Person is domiciled (other than the United States), that is or
holds itself out as engaged primarily in the business of investing or trading in
securities.
(f) No
circumstances exist regarding the relationship between the Company and any of
its Subsidiaries, on the one hand, and any of their respective clients or
customers, on the other hand, that has had or could reasonably be expected to
have a Material Adverse Effect. To the knowledge of the Company, there is no
client or customer of the Company or its Subsidiaries or Insurance Client whose
investment or other activities, reputation or credit history
would
reasonably be expected to cause the Buyer or any of its Affiliates any damages
or impair the public reputation and standing of the Buyer or any of its
Affiliates.
(g) Except as
set forth in Schedule
3.6(g), no
exemptive orders, “no-action” letters or similar exemptions or regulatory relief
have been obtained, or are any requests pending therefor, by or with respect to
the Company, its Subsidiaries or any Principals or any officer, director,
partner or employee of the Company or its Subsidiaries, in connection with the
business of the Company or any of its Subsidiaries, or with respect to any
client or customer of the Company or its Subsidiaries in connection with the
provision of Investment Management Services to such client or customer by the
Company or its Subsidiaries.
Section
3.7. Financial
Statements.
(a) The
Company has delivered to the Buyer the following financial statements, copies of
which are attached as
Schedule
3.7(a):
(i) audited
consolidated balance sheets of the Company and its Subsidiaries at February 28,
2002, February 28, 2003 and February 29, 2004, and audited consolidated
statements of income and shareholders’ equity and cash flows for each of the
three years then ended, in each
case together with the audit reports thereon of the Company’s independent
certified public accountants; and
(ii) an
unaudited consolidated balance sheet of the Company and its Subsidiaries at
December 31, 2004, and unaudited consolidated statements of income and
shareholders’ equity and cash flows for the ten month period then ended, in each
case certified by the Company’s treasurer;
(iii) unaudited
balance sheets of Park at February 28, 2002, February 28, 2003 and February 29,
2004, and unaudited statements of income and shareholders’ equity and cash flows
for each of the three years then ended, and the unaudited balance sheet of Park
at December 31, 2004;
(b) The
financial statements set forth in Schedule
3.7(a) present
fairly the financial condition of the Company, Park and its Subsidiaries at the
dates of those financial statements and the results of its operations for the
periods covered thereby in accordance with GAAP using the accrual method of
accounting, applied consistently during the periods covered thereby (except that
the Company’s and Park’s unaudited financial statements do not include footnote
disclosure and are subject to normal year-end audit adjustments that are not in
the aggregate material).
(c) The
unaudited consolidated balance sheet of the Company at December 31, 2004
(the “Balance
Sheet Date”)
(including any notes thereto) is referred to hereinafter as the “Base
Balance Sheet”. As of
the Balance Sheet Date, the Company and its Subsidiaries did not have any
liabilities of any nature, whether accrued, absolute, contingent or otherwise,
asserted or unasserted, known or unknown (including, without limitation,
liabilities as guarantor or otherwise with respect
to obligations of others, liabilities for Taxes due or then accrued or to become
due, or contingent or potential liabilities relating to activities of the
Company
and its Subsidiaries or the conduct of their respective businesses prior to
Balance Sheet Date regardless of whether claims in respect thereof had been
asserted as of such date) except (i) liabilities stated or adequately reserved
against on the Base Balance Sheet, (ii) liabilities specified in
Schedule
3.7(c), (iii)
liabilities incurred after the Balance Sheet Date in the ordinary course of
business of consistent with past practice that, individually or in the
aggregate, are not material to the Company and the Subsidiaries, taken as a
whole, and (iv) liabilities for Taxes incurred after the Balance Sheet Date in
the ordinary course of business consistent with past
practice.
Section
3.8. Taxes.
(a) The
Company and each of its Subsidiaries have paid or caused to be paid all federal,
provincial, territorial, state, municipal, local, foreign or other taxes,
imposts, rates, levies, assessments and other charges including, without
limitation, all income, franchise, gains, capital, real property, goods and
services, transfer, value added, gross receipts, windfall profits, severance, ad
valorem, personal property, production, sales, use, license, stamp, documentary
stamp, mortgage recording, excise, employment, payroll, social security,
unemployment, disability, estimated or withholding taxes, and all customs and
import duties, together with any interest, additions, fines or penalties with
respect thereto or in respect of any failure to comply with any requirement
regarding Tax Returns and any interest in respect of such additions, fines or
penalties (collectively, “Taxes”),
required to have been paid by any of them through the date hereof.
(b) The
Company and each of its Subsidiaries have withheld and paid all Taxes required
to have been withheld and paid in connection with any amounts paid or owing to
any employee, independent contractor, creditor, shareholder, or other third
party.
(c) The
Company and each of its Subsidiaries have, in accordance with Applicable Law,
filed all federal, state, material local and foreign Tax Returns required to be
filed by it. All such Tax Returns were correct and complete in all respects
(including, without limitation, after having taken into account its payroll,
property or receipts, and other factors used in any state’s apportionment or
allocation formula). A list of all federal, state, local and foreign income Tax
Returns filed with respect to the Company and its Subsidiaries for taxable
periods ended on or after February 28, 1999, is set forth in Schedule 3.8(c), and
Schedule
3.8(c)
indicates those Tax Returns that have been audited or currently are the subject
of an audit. For each taxable period of the Company and its Subsidiaries ended
on or after February 28, 1999, the Company delivered to the Buyer correct and
complete copies of all federal, state, local and foreign income Tax Returns,
examination reports and statements of deficiencies assessed against or agreed to
by the Company and any of its Subsidiaries.
(d) Neither
the IRS nor any other Governmental Authority is now asserting or, to the
Company’s knowledge, threatening to assert against the Company or any of its
Subsidiaries any deficiency or claim for additional Taxes. No claim has ever
been made by a Governmental Authority in a jurisdiction where the Company or any
of its Subsidiaries does not file reports and returns that the Company or one or
more of its Subsidiaries is or may be subject to taxation by that jurisdiction.
There are no Encumbrances on any of the assets of the Company or any of its
Subsidiaries that arose in connection with any failure (or alleged failure) to
pay any
Taxes.
Neither the Company nor any of its Subsidiaries has ever entered into a closing
agreement pursuant to Section 7121 of the Code.
(e) There has
not been any audit of any Tax Return filed by the Company or any of its
Subsidiaries, no such audit is in progress, and neither the Company nor any of
its Subsidiaries has been notified by any Tax Authority that any such audit is
contemplated or pending. Except as set forth in Schedule 3.8(e), no
extension of time with respect to any date on which a Tax Return was or is to be
filed by the Company or any of its Subsidiaries is in force, and no waiver or
agreement by the Company or any of its Subsidiaries is in force for the
extension of time for the assessment or payment of any Taxes.
(f) Neither
the Company nor any of its Subsidiaries is a party to any agreement, contract,
arrangement or plan that has resulted or could result, separately or in the
aggregate, in the payment of any “excess parachute payment” within the meaning
of Code Section 280G (or any corresponding provision of state, local or foreign
Tax law). Neither the Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code §897(c)(1)(A)(ii). Each
of the Company and its Subsidiaries have disclosed on their federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
Neither the Company nor any of its Subsidiaries is a party to or bound by any
Tax allocation or sharing agreement. Neither the Company nor any of its
Subsidiaries (i) has been a member of an Affiliated Group filing a consolidated
federal income Tax Return (other than a group the common parent of which was the
Company) or (ii) has any liability for the Taxes of any Person (other than the
Company or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(g) Schedule
3.8(g) sets
forth the following information with respect to each of the Company and its
Subsidiaries (or, in the case of clause (ii) below, with respect to each of the
Company’s Subsidiaries) as of the most recent practicable date (as well as on an
estimated pro forma basis as of the Closing giving effect to the consummation of
the transactions contemplated hereby): (i) the basis of the Company or its
Subsidiary in its assets; (ii) the basis of the Principals in the Shares and the
basis of the Company in the shares of stock of each Subsidiary (or the amount of
any excess loss account); (iii) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to the Company or any of its Subsidiaries; and
(iv) the amount of any deferred gain or loss allocable to the Company or any of
its Subsidiary arising out of any intercompany transaction.
(h) The
unpaid Taxes of the Company and its Subsidiaries (A) did not, as of the Balance
Sheet Date, exceed the reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Base Balance Sheet (rather than in any
notes thereto) and (B) do not exceed that reserve as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
the Company and its Subsidiaries in filing their Tax Returns. Since the date of
the Base Balance Sheet, neither the Company nor any of its Subsidiaries has
incurred any
liability
for Taxes arising from extraordinary gains or losses, as that term is used in
GAAP, outside the ordinary course of business consistent with past custom and
practice.
(i) Neither
the Company nor any of its Subsidiaries will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a result of
any:
(i) change in
method of accounting for a taxable period ending on or prior to the Closing
Date;
(ii) “closing
agreement” as described in Code Section 7121 (or any corresponding or similar
provision of state, local or foreign income Tax law) executed on or prior to the
Closing Date;
(iii) intercompany
transaction or excess loss account described in Treasury Regulations under Code
Section 1502 (or any corresponding or similar provision of state, local or
foreign income Tax law);
(iv) installment
sale or open transaction disposition made on or prior to the Closing Date;
or
(v) prepaid
amount received on or prior to the Closing Date.
(j) Neither
the Company nor any of its Subsidiaries has distributed stock of another Person,
or has had its stock distributed by another Person, in a transaction that was
purported or intended to be governed in whole or in part by Section 355 or
Section 361 of the Code.
(k) The
payroll, property, receipts of Company and its Subsidiaries or other factors
used in a particular state’s apportionment or allocation formula results or has
resulted in apportionment or allocation of business income to no state or
jurisdiction other than Massachusetts, and neither the Company nor any of its
Subsidiaries has non-business income that is or was allocated, apportioned or
otherwise sourced to any state or jurisdiction other than
Massachusetts.
(l) The
Company and its Subsidiaries employ the accrual method as their overall
accounting method for calculating income and deductions.
Section
3.9. Collectibility
of Accounts Receivable. All of
the accounts receivable of the Company and its Subsidiaries shown or reflected
on the Base Balance Sheet or arising after the Balance Sheet Date (less the
reserve for bad debts set forth on the Base Balance Sheet as adjusted since such
date as set forth on Schedule 3.9), were
generated by the Company and its Subsidiaries in good faith and, to the extent
outstanding on the Closing Date and included in the computation of the working
capital in the certificate delivered to the Buyer at Closing under Section
8.1(h) hereof, are valid and enforceable claims, fully collectible and subject
to no set off or counterclaim. Except as disclosed on Schedule 3.9, the
Company and its Subsidiaries have no accounts or loans receivable from any
Person that is affiliated with the Company or any of its
Subsidiaries
or from any director, officer, partner, manager, member or employee of the
Company or any of its Subsidiaries.
Section
3.10. Absence
of Certain Changes. Except
as disclosed in Schedule 3.10, since
the Balance Sheet Date there has not been:
(a) any
change in the condition (financial or otherwise), properties, assets,
liabilities, business or operations of the Company and its Subsidiaries, taken
as a whole, that individually or in the aggregate, has had or could reasonably
be expected to have a Material Adverse Effect;
(b) any
amendment, modification, waiver or termination or, to the knowledge of the
Company, proposed or threatened amendment, modification, waiver or termination,
whether written or oral, of any Advisory Contract listed in Schedule 3.6(a),
including any amendment, waiver or modification involving or relating to the
fees chargeable under any of those agreements;
(c) Any
obligation or liability of any nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, known or unknown, including, without
limitation, (i) liabilities for Taxes due or to become due, (ii) contingent or
potential liabilities relating to services provided by the Company or any of its
Subsidiaries or the conduct of the business of the Company or any of its
Subsidiaries since the Balance Sheet Date regardless of whether claims in
respect thereof have been asserted or (iii) contingent liabilities incurred by
the Company or its Subsidiaries as guarantor or otherwise with respect to the
obligations of the Company or any of its Subsidiaries or others, incurred by the
Company or its Subsidiaries, other than obligations and liabilities incurred in
the ordinary course of business consistent with past practices (it being
understood that liability claims in respect of services provided shall not be
deemed to be incurred in the ordinary course of business);
(d) any
Encumbrances on any of the properties or assets of the Company, any of its
Subsidiaries or any of the Mutual Funds, other than Permitted
Encumbrances;
(e) any
cancellation of any material debt or claim owing to, or waiver of any material
right of, the Company, any of its Subsidiaries or any of the Mutual
Funds;
(f) any
purchase, sale or other disposition, or any agreement or other arrangement for
the purchase, sale or other disposition, of any of the properties or assets of
the Company, any of its Subsidiaries or any of the Mutual Funds, other than in
the ordinary course of business consistent with past practices;
(g) any
material amount of damage, destruction or loss, whether or not covered by
insurance, to the properties, assets or business of the Company, any of its
Subsidiaries or any of the Mutual Funds;
(h) any
declaration, setting aside or payment of any dividend or distribution by the
Company, or the making of any other distribution in respect of any Company
Securities, or any direct or indirect redemption, purchase or other acquisition
by the Company of any Company Securities;
(i) any labor
trouble or claim of unfair labor practices involving the Company or any of its
Subsidiaries or change in the compensation payable or to become payable by the
Company, any of its Subsidiaries or any of the Mutual Funds to any of its
officers, employees, agents or independent contractors other than normal merit
increases in accordance with its usual practices, or any bonus payment or
arrangement made to or with any of such officers, employees, agents or
independent contractors;
(j) any
change in the identities, officers, duties or compensation of the officers or
management of the Company, any of its Subsidiaries or any of the Mutual
Funds;
(k) any
payment or discharge of a material lien or liability of the Company, any of its
Subsidiaries or any of the Mutual Funds, other than in the ordinary course of
business consistent with past practices;
(l) any
obligation or liability incurred by the Company, any of its Subsidiaries or any
of the Mutual Funds to any of its officers, directors, members, managers,
shareholders or employees, or any loans or advances made by the Company or any
of its Subsidiaries to any of its officers, directors, managers, members,
shareholders or employees, except normal compensation and expense allowances
payable to officers or employees in the ordinary course of business consistent
with past practices;
(m) any
change in accounting methods or practices, pricing, billing or collection
practices or policies, or payment practices or polices used by the Company, any
of its Subsidiaries or any of the Mutual Funds;
(n) any other
material transaction entered into by the Company, any of its Subsidiaries or any
of the Mutual Funds not in the ordinary course of business consistent with past
practices; or
(o) any
agreement or understanding, whether in writing or otherwise, for the Company,
any of its Subsidiaries or any of the Mutual Funds to take any of the actions
specified in paragraphs (a) through (n) above.
Section
3.11. Ordinary
Course. Since
Balance Sheet Date, other than with respect to transactions specifically
contemplated by this Agreement, the Company, its Subsidiaries and the Mutual
Funds have conducted their respective businesses only in the ordinary course and
consistent with past practices.
Section
3.12. Banking
Relations. All of
the arrangements that the Company, its Subsidiaries and the Mutual Funds have
with any banking institution are, in all material aspects, completely and
accurately described and summarized in Schedule 3.12,
indicating with respect to each of the arrangements the type of arrangement
maintained (such as checking account, borrowing arrangements, etc.) and the
Persons authorized in respect thereof.
Section
3.13. Intellectual
Property.
(a) Except
for the Licensed Intellectual Property (as defined in Section 3.13(c)), the
Company and its Subsidiaries have exclusive ownership of, or exclusive license
to
use, all
material Intellectual Property used in the businesses of the Company and its
Subsidiaries as presently conducted. All of the rights of the Company and its
Subsidiaries in such Intellectual Property are freely transferable. There are no
claims or demands of any other Person pertaining to any of that Intellectual
Property and no proceedings have been instituted, are pending or, to the
Company’s knowledge, threatened, that challenge the rights of the Company or any
of its Subsidiaries in respect thereof. The Company and its Subsidiaries have
the right to use, free and clear of any claims or rights of any other Person,
all customer lists (subject to applicable confidentiality restrictions),
investment or other processes, computer software, systems, data compilations,
research results and other similar information used in the businesses of the
Company and its Subsidiaries as presently conducted.
(b) All
patents, patent applications, trademarks, trademark applications and
registrations and registered copyrights and all other items of material
Intellectual Property that are owned by or licensed to the Company or any of its
Subsidiaries or used by the Company or any of its Subsidiaries in the businesses
of the Company and its Subsidiaries as presently conducted are listed in
Schedule 3.13(b). All of
such patents, patent applications, trademark registrations, trademark
applications and registered copyrights have been duly registered in, filed in or
issued by the United States Patent and Trademark Office, the United States
Register of Copyrights, or the corresponding offices of other jurisdictions as
identified on Schedule
3.13(b), and
have been properly maintained and renewed in accordance with all applicable
provisions of law and administrative regulations of the United States and each
of those other jurisdictions.
(c) All
licenses or other agreements under which the Company or any of its Subsidiaries
are granted rights in items of Intellectual Property that are material to the
business or operations of the Company or any of its Subsidiaries are listed in
Schedule 3.13(c) (the
“Licensed
Intellectual Property”). All
of those licenses or other agreements are in full force and effect, and there is
no default under any of those licenses and agreements by the Company or any of
its Subsidiaries or, to the Company’s knowledge, any other party thereto, and,
except as set forth on Schedule 3.13(c), all of
the rights of the Company or any of its applicable Subsidiaries thereunder are
freely assignable. The consummation of the transactions contemplated by this
Agreement will not materially alter or impact the unrestricted right of the
Company or its Subsidiaries to use the Intellectual Property thereunder free and
clear of claims or other rights of any Person (other than the claims of a
licensor under a licensing or similar agreement disclosed on Schedule 3.13(c)). To the
knowledge of the Company, the licensors under those licenses and other
agreements have and had all requisite power and authority to grant the rights
purported to be conferred thereby. True and complete copies of all those
licenses and other agreements, and any amendments thereto, have been provided to
the Buyer.
(d) Neither
the Company nor any of its Subsidiaries has granted rights to any Person in
Intellectual Property owned or licensed by the Company or any of its
Subsidiaries.
(e) The
Company and its Subsidiaries have taken all commercially reasonable steps
required in accordance with sound business practices to establish and preserve
its ownership and other rights in all Intellectual Property. Except as set forth
in Schedule
3.13(e) hereto,
the Company and its Subsidiaries have required all Persons having access to
valuable proprietary or non-public information of the Company and its
Subsidiaries to execute agreements under which those Persons are required to
maintain the confidentiality of all proprietary or non-public
information
of the Company and its Subsidiaries. The Company and its Subsidiaries have not
made any of that information available to any Person other than employees of the
Company and its Subsidiaries except pursuant to written agreements requiring the
recipients to maintain the confidentiality of the information.. The Company has
no knowledge of any infringement by other Persons of any Intellectual Property
rights of the Company and its Subsidiaries.
(f) To the
Company’s knowledge, the present business, activities and products of the
Company, its Subsidiaries and the Mutual Funds and those presently contemplated
by the Company do not infringe any rights of any other Person in Intellectual
Property. No proceeding charging the Company, any of its Subsidiaries or any of
the Mutual Funds with infringement of any Intellectual Property of any other
Person has been filed or, to the knowledge of the Company, is threatened to be
filed. To the knowledge of the Company, none of the Company, its Subsidiaries or
the Mutual Funds is making unauthorized use of any confidential information or
trade secrets of any Person, including without limitation, any former employer
of any past or present employee of the Company or any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries nor, to the knowledge of the
Company, any of the Company’s or any of its Subsidiaries’ employees have any
agreements or arrangements with any Persons other than the Company and its
Subsidiaries related to confidential information or trade secrets of such
Persons or restricting any such employee’s ability to engage in business
activities of any nature.
Section
3.14. Contracts. Except
for contracts, commitments, plans, agreements and licenses expressly
contemplated hereby or identified in Schedule
3.14 or in
Schedule
3.5(a),
Schedule 3.6(a),
Schedules 3.13(b) or
(c),
Schedules
3.18(b) or
(c) or
Schedule
3.23(c) (true
and complete copies of which have been delivered to the Buyer), none of the
Company, any of its Subsidiaries or any of the Mutual Funds is a party to or
subject to:
(a) any
Advisory Contract or any other contract for the provision of Investment
Management Services or other similar or related services;
(b) any plan
or contract providing for bonuses, pensions, options, stock (or beneficial
interest) purchases (or other securities or phantom equity purchases), deferred
compensation, retirement payments, profit sharing, or the like;
(c) any
employment arrangement or other employment contract or contract for services
that is not terminable at will by the Company or one of its Subsidiaries or a
Mutual Fund without liability for any penalty or severance payment (except for
regular payments in arrears for services rendered under contracts that require
payment for services rendered to the date of such termination);
(d) any
contract or agreement for the purchase of any assets, material or equipment,
except purchase orders in the ordinary course of business consistent with past
practice for less than $50,000 in the aggregate;
(e) any other
contracts or agreements creating any obligations of the Company, any of its
Subsidiaries or any of the Mutual Funds of $50,000 or more with respect to any
such contract or agreement;
(f) any
contract or agreement not made in the ordinary course of business;
(g) any
contract with any solicitor or sales agent;
(h) any
contract limiting the freedom of the Company, any of its Subsidiaries or any of
the Mutual Funds or any of the Principals (or their Affiliates) to compete in
any line of business or with any Person;
(i) any
license agreement;
(j) any
agreement providing for the borrowing or lending of money, and none of the
Company, any of its Subsidiaries or any of the Mutual Funds has any obligations:
(i) for borrowed money, (ii) evidenced by bonds, debentures, notes or similar
instruments, (iii) to pay the deferred purchase price of property or services,
(iv) under leases that would, in accordance with GAAP, appear on the balance
sheet of the lessee as a liability, (v) secured by an Encumbrance, (vi) in
respect of letters of credit, or bankers acceptances, contingent or otherwise,
or (vii) in respect of any guaranty or endorsement or other obligations to be
liable for the debts of another person or entity; or
(k) any other
material contract or agreement to which the Company, any of its Subsidiaries or
any of the Mutual Funds is a party or by which it is bound.
Each of
the contracts described in Schedule
3.5(a),
Schedule 3.6(a),
Schedules 3.13(b)
and (c),
Schedule
3.14,
Schedules
3.18(b) or
(c) or
Schedule
3.23(c) is a
valid and binding obligation of the Company, a Subsidiary of the Company or one
of the Mutual Funds, is in full force and effect and is enforceable in
accordance with its respective terms, and there is not, under any such contract,
an existing material breach by the Company, any of its Subsidiaries or any of
the Mutual Funds or, to the knowledge of the Company, any other party thereto or
any event that, with the giving of notice or the lapse of time or both, would
become such a breach by the Company, any of its Subsidiaries or any of the
Mutual Funds or, to the knowledge of the Company, any other party thereto. The
Company and its Subsidiaries have at all times been in compliance with the
guidelines and restrictions set forth in any contract described in Schedule 3.6(a),
including, without limitation, any limitation set forth in the applicable
prospectus, offering memorandum or marketing material for a collective
investment vehicle or governing documents for any Client. Each contract listed
on Schedule
3.6(a) will
remain valid and effective following the Closing in accordance with its
respective terms if a Client Consent is obtained in respect of the contract
prior to the Closing.
Section
3.15. Litigation. Except
as set forth in Schedule 3.15, there
is no litigation or legal or other action, suit, proceeding or, to the knowledge
of the Company, investigation, at law or in equity, before any Governmental
Authority, (a) in which the Company, any of its Subsidiaries, any Principal, any
officer, director, manager, member, partner or employee of the Company or any of
its Subsidiaries is engaged, or, to the knowledge of the Company, with which any
of them is threatened, in connection with the business, affairs, properties or
assets of the Company or any of its Subsidiaries, (b) that seeks damages from
any Person identified in the preceding clause (a) in connection with the
transactions contemplated by this Agreement, or (c) that (individually or in the
aggregate) might call into question the validity or hinder the
enforceability
or performance of this Agreement, or any of the other agreements, documents and
instruments contemplated hereby and the transactions contemplated hereby and
thereby. There are no proceedings pending, or to the knowledge of the Company,
threatened, relating to the termination of, or limitation of, the rights of the
Company or any of its Subsidiaries regarding any of their respective
registrations under the Advisers Act, as an investment adviser, or any similar
or related rights any registrations or qualifications with various states or
other jurisdictions, or under any other Applicable Laws.
Section
3.16. Compliance
with Laws.
(a) The
Company and its Subsidiaries are, and at all times have been, in compliance in
all material respects with all Applicable Laws including (i) the Advisers Act,
the USA Patriot Act, the Commodity Exchange Act, ERISA, the Exchange Act, the
Investment Company Act, and the Securities Act and the regulations promulgated
under each of them, (ii) the rules and regulations of self-regulatory
organizations including, the NASD and each applicable exchange (as defined under
the Exchange Act), (iii) the privacy and security provisions of the
Xxxxx-Xxxxx-Xxxxxx Act of 1999 and (iv) and all other foreign, federal or state
securities laws and regulations applicable to the business or affairs or
properties or assets of the Company and any of its Subsidiaries.
(b) Neither
the Company, any Subsidiary or any Principal nor, to the knowledge of the
Company, any officer, director, shareholder, manager, member, partner or
employee of the Company or any of its Subsidiaries, is in default with respect
to any judgment, order, writ, injunction, decree, demand or assessment issued by
any court or any other Governmental Authority relating to any aspect of the
business or affairs or properties or assets of the Company or any of its
Subsidiaries or that could give rise to an affirmative answer to any of the
questions in Item 11, Part I of Form ADV.
(c) Neither
the Company or any of its Subsidiaries nor any of the Principals is subject to
any cease-and-desist or other order issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or is a recipient of any supervisory letter from or has adopted
any resolutions at the request of, any self-regulatory organization or other
Governmental Authority, that restricts the conduct of the business of any of the
Company, its Subsidiaries or the Principals or that in any manner is related to
the business of any of the Company, the Subsidiaries, or the Principals, and the
knowledge of the Company, none of those Persons is threatened with the
imposition or receipt of any of the foregoing.
(d) Neither
the Company, any of its Subsidiaries or any Principal nor, any officer,
director, manager, member, partner or employee of the Company or any of its
Subsidiaries, nor, to the knowledge of the Company, any Other Shareholder is
charged or, to the knowledge of the Company, threatened with, or under
investigation with respect to, any violation of any provision of any Applicable
Laws, including any violation that could give rise to an affirmative answer to
any of the questions in Item 11, Part I of Form ADV.
Section
3.17. Business;
Registrations.
(a) The
Company has, since February 11, 1983 been engaged solely in the business of
providing Investment Management Services.
(b) The
Company has at all times since February 11, 1983 been duly registered as an
investment adviser under the Advisers Act. The Company is duly registered,
licensed and qualified as an investment adviser or has provided notice of
operation as, an investment adviser in all jurisdictions where such
registration, licensing, qualification or notice is required in order to conduct
their business and where the failure to be so registered, licensed or qualified
or to have provided notice could reasonably be expected to have a Material
Adverse Effect. The Company and its Subsidiaries are in compliance with all
foreign, federal and state laws requiring registration, licensing, qualification
or notice of operation as, an investment adviser and have currently effective
notice filings in each of the jurisdictions listed in Schedule
3.17(b). The
Company has delivered to the Buyer, true and complete copies of the most recent
Forms ADV of the Company as amended to date, and has made available copies of
all foreign and state registration forms, in each case as amended to date. The
information contained in such forms was true and complete at the time of filing
and the Company has made all amendments to such forms as are required under any
Applicable Law. At all times in connection with its federal registration as an
investment adviser, the Company has maintained, and currently maintains, a Form
ADV that complies in all material respects with Applicable Law. At no
point during this period has the Company’s Form ADV (including its current Form
ADV) included an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were or are made, not
misleading.
(c) The
Company, its Subsidiaries and their respective personnel validly possess all
Permits required from foreign, federal, state or local authorities in order for
them to conduct the businesses presently conducted by the Company and its
Subsidiaries in the manner presently conducted. Neither the Company or any of
its Subsidiaries nor any of their respective personnel is subject to any
material limitation imposed in connection with one or more of the
Permits.
(d) WSC is
and has, since October 10, 1984 been a member in good standing of the NASD and
duly registered as a broker-dealer under the Exchange Act, and is and has, since
September 9, 2002, been registered and a member in good standing of the MSRB.
WSC is duly registered, licensed and qualified as a broker-dealer in all
jurisdictions where such registration, licensing or qualification is required in
order to conduct its business and where the failure to be so registered,
licensed or qualified could have a Material Adverse Effect. WSC and its
employees do not hold any registrations, memberships or similar membership
privileges with any national securities exchange, board of trade, commodities
exchange, clearing corporation or association, securities dealers association or
similar institutions other than the NASD and MSRB, and neither the Company nor
any of its Subsidiaries other than WSC holds any registrations, memberships or
similar membership privileges with any national securities exchange, board of
trade, commodities exchange, clearing corporation or association, securities
dealers association or similar institutions. The Company has delivered to the
Buyer a true and complete copy of each agreement with respect to such
registration, membership or privileges and each such agreement is a valid and
binding agreement of WSC, enforceable in accordance with its terms. WSC is in
compliance in all material respects with all Applicable Laws requiring
registration,
licensing
or qualification as a broker-dealer, including without limitation all net
capital requirements, and has currently effective notice filings in each of the
jurisdictions listed in Schedule
3.17(b).
(e) The
Company has delivered to the Buyer or its representatives, true and complete
copies of WSC’s most recent Form BD, as amended to date, and has made available
copies of all foreign and state registration forms, likewise as amended to date.
The information contained in such forms was true and complete in all material
respects at the time of filing and WSC has made all amendments of a material
nature to such forms as are required under any Applicable Laws. The information
contained in WSC’s most recent Form BD, as amended to date, is true and complete
in all material respects.
(f) Schedule
3.17(f) contains
a complete list of (i) each Person who is, or who is required to be, registered
in connection with the business of the Mutual Funds, the Real Estate
Partnerships, the Company or any of its Subsidiaries as an investment adviser
representative within the meaning of the Advisers Act, an associated person
within the meaning of the Exchange Act, or an insurance agent under other
Applicable Laws, (ii) all Permits required from any Governmental Authority to be
held by such Persons in connection with either the Investment Management
Services or Brokerage Services rendered by the Company or any of its
Subsidiaries to or on behalf of the Mutual Funds or the Real Estate
Partnerships, or solicitation of broker-dealers, banks and other institutions
for the purpose of distributing Mutual Fund or the Real Estate Partnerships, and
(iii) all professional licenses and registrations required to be held by such
Persons in connection with such Investment Management Services or Brokerage
Services.
(g) Neither
the Company or any of its Subsidiaries nor, to the knowledge of the Company, any
Person “associated” (as defined under both the Investment Company Act and the
Advisers Act) with the Company or any of its Subsidiaries, has been convicted of
any crime or is or has engaged in any conduct that would be a basis for (i)
denying, suspending or revoking registration of any investment adviser under the
Advisers Act, or ineligibility to serve as an associated person of any
investment adviser, (ii) being ineligible to serve as an investment adviser (or
in any other capacity contemplated by the Investment Company Act) to a
registered investment company pursuant to the Investment Company Act or (iii)
being ineligible to serve as a broker-dealer or an associated person of a
broker-dealer pursuant to Section 15(b) of the Exchange Act, and to the
knowledge of the Company, there is no proceeding or investigation that is
reasonably likely to become the basis for any such ineligibility,
disqualification, denial, suspension or revocation.
(h) Neither
the Company nor any of its Subsidiaries is a “commodity pool operator” or
“commodity trading adviser” within the meaning of the Commodity Exchange Act.
Neither the Company or any of its Subsidiaries nor any of its officers or
employees is required to be registered as a commodity trading adviser, a
commodity pool operator, a futures commission merchant, an associated person, a
counseling officer, a sales person or in any similar capacity with the SEC, the
Commodity Futures Trading Commission, the National Futures Association or the
securities commission of any state or any self-regulatory organization. No
Person other than a full-time employee of the Company or one of its Subsidiaries
renders Investment Management
Services
to or on behalf of, or solicits Persons with respect to, the provision of
Investment Management Services by, the Company and its Subsidiaries.
(i) The only
place of business (within the meaning of Rule 203A-3(b) under the Advisers Act)
of the Company and its Subsidiaries is located at 00 Xxxxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxxxxxxx 00000.
Section
3.18. Mutual
Funds.
(a) Each
Mutual Fund is duly organized, validly existing and in good standing in the
jurisdiction in which it is organized and has all requisite power and authority
to conduct its business in the manner and in the places where its business is
currently conducted. Each Mutual Fund is and has been, since its inception,
engaged solely in the investment company business.
(b) Schedule
3.18(b)
describes each of the investment advisory agreements, distribution or
underwriting contracts, plans adopted pursuant to Rule 12b-1 under the
Investment Company Act, arrangements for the payment of service fees (as such
term is defined in Rule 2830 of the NASD Conduct Rules), administrative services
agreements, custodian agreements and other agreements and contracts (other than
agreements and contracts entered into by the Mutual Funds in the ordinary course
of business in connection with the making of investments) (collectively, the
“Fund
Agreements”)
pertaining to any of the Funds, all of which are in full force and effect. As to
each Mutual Fund, there is in effect an investment advisory agreement and a
distribution agreement. Each Fund Agreement pursuant to which the Company or WSC
has, or may have, received compensation with respect to its activities in
connection with any of the Mutual Funds was duly approved in the manner and to
the extent required under the applicable provisions of the Investment Company
Act.
(c) Schedule
3.18(c) sets
forth (i) a listing of all contracts pursuant to which the Company or any of its
Subsidiaries or any other party provides Investment Management Services or
administration, accounting, distribution or other services to a Mutual Fund on
the date of this Agreement, copies of which have previously been provided to the
Buyer, and (ii) the most recent date on which each such contract was approved,
renewed or continued in accordance with Section 15 of the Investment Company
Act. Each such contract, and any subsequent renewal thereof, has been duly
approved, authorized, executed and delivered by each party thereto and, to the
extent applicable, has been adopted in compliance with Section 15 of the
Investment Company Act and is a valid and binding agreement of each such party,
enforceable against the applicable Mutual Fund accordance with its terms
(subject to bankruptcy, insolvency, moratorium, reorganization and similar laws
affecting creditors’ rights generally and to general equity principles), and
each such party is in material compliance with the terms of each investment
advisory contract and other contract to which it is a party, is not currently in
material default under any of the terms of any such investment advisory contract
or other contract; no event has occurred or condition exists that with notice or
the passage of time would constitute such a default, and each such investment
advisory contract or other contract is in full force and effect. Except as set
forth in Schedule
3.18(c), no such
contract, or any other arrangement or understanding relating to a Mutual Fund,
contains any undertaking or proposal by the Seller to (A) cap fees or to
reimburse any or all fees or expenses of a Mutual Fund or (B) assume or pay any
liabilities or obligations of a Mutual Fund, and except as set forth in
Schedule
3.18(c), the
Company
and its Subsidiaries have no such obligations. Except as set forth in
Schedule
3.18(c), no
Mutual Fund has expressed an intention to the Company or any of its Subsidiaries
to terminate or reduce its relationship with any of them, or adjust the fee
schedule, fee caps, waivers or expense limitations or undertakings with respect
to any contract in any manner.
(d) Schedule
3.18(d) lists
all plans of distribution relating to any currently outstanding shares of the
Mutual Funds and adopted in accordance with Rule 12b-1 (the “Rule
12b-1 Plans”) under
the Investment Company Act and all agreements related thereto. True and complete
copies of the Rule 12b-1 Plans and related agreements have previously been
provided to the Buyer. All of the Rule 12b-1 Plans and any related agreements
have been adopted (and the Rule 12b-1 Plan have from time to time been renewed)
in accordance with the provisions of Rule 12b-1 under the Investment Company Act
and are all currently in full force and effect.
(e) Since the
date of its respective most recent audited financial statements, each Mutual
Fund has had and now has all material permits, licenses, certificates of
authority, orders and approvals of, and has made all material filings,
applications and registrations with, any Governmental Authorities that are
required under Applicable Law in order to permit each such Mutual Fund to carry
on its respective business as presently conducted, and all such permits,
licenses, certificates of authority, registrations, orders and approvals are in
full force and effect. There are no proceedings pending or, to the knowledge of
the Company, threatened, and, to the knowledge of the Company, no event has
occurred or condition exists that is reasonably likely to form the basis for any
proceeding, that is reasonably likely to result in the revocation, cancellation
or suspension, or any adverse modification, of any such permit, license,
certificate of authority, order or approval, and the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby will
not result in any such revocation, cancellation, suspension or
modification.
(f) Each of
the Mutual Funds has at all times been operated in compliance in all material
respects with Applicable Law and the applicable guidelines and restrictions set
forth in the prospectus, statement of additional information or other offering
documents of the relevant Mutual Fund, and consummation of the transactions
contemplated by this Agreement will not result in any violation of any such
guidelines or restrictions or any procedures adopted by the respective trustees
of the Mutual Funds.
(g) Except as
set forth in Schedule
3.18(g), there
are no currently effective special restrictions, consent judgments or SEC or
judicial orders on or with regard to any of the Mutual Funds. No stop order
suspending the effectiveness of any registration statement of any of the Mutual
Funds has been issued and no proceedings for that purpose have been instituted
or, to the knowledge of the Company are contemplated.
(h) None of
the Company, any of its Subsidiaries or any of the Mutual Funds has, or has had
at any time, any agreement or understanding (i) with any shareholder or group of
shareholders of any of the Mutual Funds to permit or encourage the practice of
short-term buying or selling of Mutual Fund shares or (ii) relating to the
receipt and transmission of orders to purchase or redeem Mutual Fund shares
after 4:00 p.m. New York City time, other than arrangements with financial
intermediaries (including, without limitation, retirement plan administrators)
who are to receive orders from investors prior to 4:00 p.m. New York City
time.
(i) Each
prospectus relating to a Mutual Fund (which term, as used in this Agreement
includes any related statement of additional information), as amended or
supplemented from time to time, used since the Mutual Fund’s inception has
complied in all material respects with Applicable Law, and each current
prospectus for the Mutual Funds so complies. All supplemental advertising
and marketing material relating to each Mutual Fund used since each Mutual
Fund’s inception has complied in all material respects with Applicable Law, and
all such advertising and marketing material currently in use complies in all
material respect with Applicable Law. None of such prospectuses,
amendments, supplements or supplemental advertising and marketing materials, as
of their respective dates, included or includes an untrue statement of a
material fact or has omitted or omits to state a material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were or are made, not misleading.
(j) Each
Mutual Fund’s investments have been made in accordance with that Mutual Fund’s
investment policies and restrictions set forth in its registration statement in
effect at the time the investments were made and have been held in accordance
with its respective investment policies and restrictions, to the extent
applicable and in effect at the time such investments were held,
except
for a limited number of inadvertent investments that were all promptly
recognized as such and promptly remedied in such a manner such that neither the
applicable Mutual Fund nor the Company nor any of its Subsidiaries suffered or
incurred any material liabilities, damages or costs.
(k) Each of
the Mutual Funds has timely filed (other than in respect of Taxes, that are the
subject of Section 3.18(m)) all reports, registration statements and other
documents, together with any amendments required to be made with respect
thereto, that were required to be filed with any Governmental Authority,
including the SEC (the “Fund
Regulatory Documents”), and
has paid all fees and assessments due and payable in connection therewith, and
as of their respective dates, each of the foregoing filings complied in all
material respects with the requirements of Applicable Law, and none of the Fund
Regulatory Documents or related prospectuses, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company has made available to the Buyer a copy of each Fund
Regulatory Document filed with the SEC since January 1, 2003 and will
deliver to the Buyer promptly after the filing thereof a copy of each Fund
Regulatory Document filed with the SEC by a Mutual Fund after the date hereof
and prior to the Closing.
(l) None of
the Company or any of its Subsidiaries or any Person who is an “affiliated
person” or an “interested person” (each as defined in the Investment Company
Act) with respect to the Company or any of its Subsidiaries, receives or is
entitled to receive any compensation directly or indirectly (i) from any Person
in connection with the purchase or sale of securities or other property to, from
or on behalf of any of the Mutual Funds, other than bona fide ordinary
compensation as principal underwriter for any of the Mutual Funds or as broker
in connection with the purchase or sale of securities in compliance with Section
17(e) of the Investment Company Act, or (ii) from any of the Mutual Funds or
their security holders for other than bona fide investment advisory,
administrative or other services. Accurate and complete
disclosure
of all such compensation arrangements has been made in the registration
statements of the Mutual Funds filed in accordance with Applicable
Law.
(m) Except as
set forth on Schedule
3.18(m), (i)
since its inception, each Mutual Fund has elected to be treated as, and has
qualified to be classified as, a regulated investment company taxable under
Subchapter M of Chapter 1 of the Code and under any similar provisions of state
or local law in any jurisdictions in which the Mutual Fund filed, or is required
to file, a Tax Return; (ii) each Mutual Fund has filed all material Tax Returns
required to have been filed and has paid in a timely manner all material Taxes
required to have been paid by the Mutual Fund, and, to the knowledge of the
Company, there are no circumstances that would cause a Mutual Fund to fail to so
qualify in the current taxable year; (iii) no Mutual Fund has waived in writing
any statute of limitations in respect of Taxes of that Mutual Fund; (iv) no
issues that have been raised in writing by the relevant Tax Authority in
connection with the examination of the Tax Returns referred to in clause (ii)
are currently pending; and (v) all deficiencies asserted in writing or
assessments made in writing as a result of any examination of the Tax Returns
referred to in clause (ii) by a Tax Authority have been paid in
full.
(n) The
Company has made available to the Buyer copies of the most recently available
audited financial statements, prepared in accordance with GAAP, of each of the
Mutual Funds, and unaudited financial statements, prepared in accordance with
GAAP, of each of the Mutual Funds for the first six months of its most recent
fiscal year if the ending date of such six-month period occurred more than sixty
(60) days prior to the date of this Agreement (each hereinafter referred to as a
“Fund
Financial Statement”). Each
of the Fund Financial Statements is consistent with the books and records of
that Fund, and presents fairly the consolidated financial position of the
related Mutual Fund in accordance with GAAP applied on a consistent basis
(except as otherwise noted therein) at the respective date of such Fund
Financial Statement and the results of operations and cash flows for the
respective periods indicated. The Fund Financial Statements reflect and disclose
all material changes in accounting principles and practices adopted by each of
the Mutual Funds during the periods covered by each Fund Financial Statement.
The independent auditors of the Mutual Fund are appropriately registered with
the Public Company Accounting Oversight Board (PCAOB), and, in each instance,
the engagement of those auditors for audit or non-audit services has complied
with Applicable Law.
(o) There is
no litigation or legal action, suit, proceeding or investigation at law or in
equity pending or, to the knowledge of the Company, threatened, in any court or
before any other Governmental Authority, by, against, or otherwise involving,
any of the Mutual Funds, or to the knowledge of the Company any officer or
trustee thereof relating to the activities of the Mutual Funds, any
disqualification of any of the Mutual Funds or to the knowledge of the Company
any officer or trustee thereof under Section 9(a) of the Investment Company Act,
or any event that would require the Company to give an affirmative response to
any of the questions in Item 11 to Part I of its Form ADV or require WSC to give
an affirmative response to any of the questions in Item 11 of its Form BD. There
are no judgments, injunctions, orders or other judicial or administrative
mandates outstanding against or affecting any of the Mutual Funds or, to the
knowledge of the Company any officer or trustee thereof relating to the
activities of or affecting the Mutual Funds.
(p) (i) Each
Mutual Fund is duly registered as an investment company under the Investment
Company Act; (ii) all shares of the Mutual Funds outstanding on the date of this
Agreement, and all shares of the Mutual Funds to be issued between the date of
this Agreement and the Closing will be, duly and validly issued, fully paid and
nonassessable and qualified for sale, or sold pursuant to an exemption from such
qualification, under all applicable laws of any state or territory of the United
States of America; (iii) all outstanding securities of the Mutual Funds required
to be registered under the Securities Act have been, or between the date of this
Agreement and the Closing will be, offered and sold in accordance with the
registration requirements of the Securities Act; and (iv) no registration
statement relating to securities issued by the Mutual Funds contained as of its
effective date any untrue statement of a material fact or omitted to state a
material fact required to be stated therein in order to make the statements
therein relating to the Mutual Funds not misleading.
(q) Except as
set forth on Schedule 3.18(q), no exemptive orders have been obtained, nor are
any requests pending therefor, with respect to any Mutual Fund under the
Exchange Act, the Securities Act, the Investment Company Act or the Investment
Advisers Act.
(r) Each
Mutual Fund has duly adopted all required codes, policies, procedures pursuant
to the Investment Company Act, to the extent applicable, and has otherwise
complied in all material respects with any applicable requirements of such Act.
Each Mutual Fund has duly adopted a code of ethics as contemplated by the
Xxxxxxxx-Xxxxx Act of 2002 and the applicable rules and regulations thereunder.
To the knowledge of the Company, there have been no violations or allegations of
violations of such codes, policies or procedures.
(s) All
advertising or marketing materials relating to any Mutual Fund that are required
to be filed with the NASD and state regulators have been timely filed
therewith.
Section
3.19. Compliance
Policies and Procedures. To the
extent applicable, the Company and its Subsidiaries were in compliance with Rule
206(4)-7 under the Advisers Act by October 5, 2004 and Rule 204A-1 by February
1, 2005. Prior to taking such measures, the Company had written policies and
procedures to the extent required under the Advisers Act, and there have been no
material violations or allegations of material violations of such written
policies and procedures including without limitation procedures for protection
of non-public information and compliance with fiduciary standards.
Section
3.20. Insurance
Agency Matters.
(a) Each
employee of the Company or any of its Subsidiaries, including Park, responsible
for selling, soliciting or placing insurance for the Company or any of its
Subsidiaries, including Park, is duly licensed to act as an insurance agent,
broker or producer and is in good standing with each applicable Governmental
Authority, including all applicable state insurance regulators. Schedule
3.20(a) is a
true, complete and accurate list of each Governmental Authority with which each
such employee is licensed to engage in such activities, and all such licenses
are in good standing. Park is duly licensed to act as an insurance agent,
broker, producer or adviser, as the case may be, in each state identified on
Schedule
3.20(a). Except
as listed on Schedule 3.20(a), Park does not sell any fixed or variable annuity
products.
(b) Schedule
3.20(b) lists
all of the clients and customers of Park (the “Insurance
Clients”) and
the commissions to which Park is entitled with respect to each such Insurance
Client, as of the date hereof. Park has the exclusive and unencumbered right to
receive those commissions and, except as set forth in Schedule
3.20(b), no
consent of any other party is required with respect to those exclusive rights in
connection with the transactions contemplated by this Agreement. To the
knowledge of the Company, no policies of insurance in force for which Park
receives commissions or other remuneration will be terminated before the stated
expiration date or will not be renewed upon expiration.
(c) No Person
other than the employees of the Company and its Subsidiaries, including Park, is
or has been authorized or permitted to place business on Park’s behalf. No
binder of insurance or other proposal of coverage has been issued or sent to any
Person by Park or on its behalf unless and until the relevant risk has been
properly bound and all binders of insurance and proposals of coverage on the
part of Park are complete and accurate in all material respects.
(d) Schedule
3.20(d) sets
forth the policy of Park with respect to the commissions booked in its records,
and no commissions have been booked except in accordance with that policy. To
the knowledge of the Company, there are no facts or circumstances that might
require reversal of commissions booked or return of commissions already
collected.
(e) Park has
not breached any duty owed to the Insurance Clients. Park has not paid insurance
premiums, premium adjustments or other items on behalf of an Insurance Client
except with the authority of that Insurance Client.
(f) Park has
not been party to the placement, directly or indirectly, of insurance that is
(i) unlawful or (ii) a part of a fictitious or sham transaction.
(g) Except
for arrangements between Park and certain Principals, referred to in Section
2.12, there are no arrangements whereby any part of any brokerage or commission
payable to Park by any insured is shared with the insured or any other
Person.
(h) To the
knowledge of the Company, all insurance carriers with which business has been
placed by Park are paying claims in the normal course and without undue
delay.
(i) The only
fixed or variable annuity products sold or marketed by Park are those listed on
Schedule
3.20(i).
Section
3.21. Transactions
with Interested Persons. Except
as set forth on Schedule
3.21, none of
the Affiliates, shareholders, partners, managers, members, officers, supervisory
employees or directors, nor, to the knowledge of the Company, any of their
respective Immediate Family members, (a) is a party to any transaction or
contract or arrangement with the Company or any of its Subsidiaries, or (b) owns
directly or indirectly on an individual or joint basis any interest in
(excluding passive investments in less than 1% of the shares of any company that
lists its shares on a national securities exchange), or serves as an officer or
director or in another similar capacity of, any competitor, supplier or customer
or client of the Company or any of its Subsidiaries, or any organization that
has a material contract or arrangement with the Company.
Section
3.22. Employee
Benefit Programs.
(a) Schedule
3.22 hereto
lists every Employee Program (as defined in Section 3.22(h) that has been
“maintained” (as defined below) by the Company or its ERISA Affiliates (as
defined in Section 3.21(h)) at any time after December 31, 1997.
(b) Each
Employee Program that has ever been maintained by the Company or any of its
ERISA Affiliates and that has at any time been intended to qualify under Section
401(a) or 501(c)(9) of the Code has received a favorable determination or
approval letter from the IRS regarding its qualification under the applicable
Section of the Code. To the knowledge of the Company, no event or omission has
occurred that would cause any such Employee Program to lose its qualification
under the applicable Code Section.
(c) With
respect to any Employee Program ever maintained by the Company or any of its
ERISA Affiliates, there has occurred no (i) non-exempt “prohibited transaction,”
as defined in Section 406 of ERISA or Section 4975 of the Code, or (ii) breach
of any duty under ERISA or other Applicable Law (including, without limitation,
any health care continuation requirements), or any other tax law requirements,
or conditions to favorable tax treatment, applicable to such plan, that, in the
case of any of (i) or (ii), would result, directly or indirectly (including,
without limitation, through any obligation of indemnification or contribution),
in any Taxes, penalties or other liability to the Company or any of its ERISA
Affiliates. No litigation, arbitration, or governmental administrative
proceeding (or investigation) or other proceeding (other than those relating to
routine claims for benefits) is pending or, to the knowledge of the Company,
threatened with respect to any such Employee Program. All payments and/or
contributions required to have been made by the Company or any ERISA Affiliate
with respect to all Employee Programs ever maintained by the Company or any
ERISA Affiliate, for all periods prior to the Closing Date, either have been
made or have been accrued.
(d) Neither
the Company nor any ERISA Affiliate has ever maintained any Employee Program
that has been subject to title IV of ERISA (including, but not limited to, any
Multiemployer Plan (as defined in Section 3.22(h)) or (ii) has ever provided
health care or any other non-pension benefits to any employees after their
employment was terminated (other than as required by part 6 of subtitle B of
Title I of ERISA or the corresponding provisions of the Code or similar state
law) or has ever promised to provide such post-termination
benefits.
(e) With
respect to each Employee Program maintained by the Company or any of its ERISA
Affiliates within the three years preceding the Closing, complete and correct
copies of the following documents (if applicable to such Employee Program) have
previously been made available to the Buyer: (i) all documents embodying or
governing such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended;
(ii) the most recent IRS determination or approval letter with respect to such
Employee Program under Code Sections 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS Forms 5500, with all applicable schedules and accountants’
opinions attached thereto; (iv) the summary plan description for such Employee
Program (or other descriptions of such Employee Program provided to employees)
and all modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy) related to such
Employee
Program; and (vi) any documents evidencing any loan to an Employee Program that
is a leveraged employee stock ownership plan.
(f) Each
Employee Program required to be listed in Schedule 3.22 may be amended,
terminated or otherwise modified by the Company or the ERISA Affiliate to the
greatest extent permitted by law.
(g) Neither
the Company nor any ERISA Affiliate is party to any agreement or Employee
Program that would require it, or the Buyer or any Affiliates to take any action
or make any payment that would result, either individually or in the aggregate,
in the payment of an “excess parachute payment” within the meaning of Section
280G of the Code.
(h) For
purposes of this section:
(i) “Employee
Program” means
(A) all employee benefit plans within the meaning of ERISA Section 3(3),
including, but not limited to, multiple employer welfare arrangements (within
the meaning of ERISA Section 3(4)), plans to which more than one unaffiliated
employer contributes and employee benefit plans (such as foreign or excess
benefit plans) that are not subject to ERISA; and (B) all stock option plans,
bonus or incentive award plans, severance pay policies or agreements, deferred
compensation agreements, supplemental income arrangements, vacation plans, and
all other employee benefit plans, agreements, and arrangements not described in
(A) above. In the case of an Employee Program funded through an organization
described in Code Section 501(c)(9), each reference to such Employee Program
shall include a reference to such organization.
(ii) An entity
“maintains” an
Employee Program if that entity sponsors, contributes to, or provides (or has
promised to provide) benefits under that Employee Program, or has any obligation
(by agreement or under Applicable Law) to contribute to or provide benefits
under that Employee Program, or if that Employee Program provides benefits to or
otherwise covers employees of that entity, or their spouses, dependents, or
beneficiaries.
(iii) An entity
is an “ERISA
Affiliate” of the
Company if it would have ever been considered a single employer with the Company
under ERISA Section 4001(b) or part of the same “controlled group” as the
Company for purposes of ERISA Section 302(d)(8)(C).
(iv) “Multiemployer
Plan” means a
(pension or non-pension) employee benefit plan to which more than one employer
contributes and that is maintained pursuant to one or more collective bargaining
agreements.
Section
3.23. List
of Directors, Officers and Employees.
(a) Schedule
3.23(a) contains
a true and complete list of all current directors, officers and employees of,
and consultants to, the Company and any of its Subsidiaries and includes the
current job title and aggregate annual compensation of each such individual. To
the knowledge of the Company (without inquiry), as of the date hereof, no
employee of the
Company
or any of its Subsidiaries currently intends to terminate employment with the
Company or a Subsidiary prior to the first anniversary of the
Closing.
(b) To the
knowledge of the Company, except as set forth on Schedule 3.23(b), each
Principal is in good health and, to the knowledge of the Company (without
inquiry), each employee listed on Schedule
3.23(a) is in
good health.
(c) Except as
set forth on Schedule
3.23(c), there
are no controversies pending or threatened between the Company or any of its
Subsidiaries and any of their respective employees. Except as set forth on
Schedule 3.23(c), the
Company and its Subsidiaries have no obligations, contingent or otherwise, under
(i) any employment, collective bargaining or other labor agreements, (ii) any
written or oral agreements containing severance or termination pay arrangements,
(iii) any deferred compensation agreements, retainer or consulting arrangements,
(iv) any pension or retirement plans, any bonus or profit-sharing plans, any
unit or membership interest option plans, or unit or membership interest
purchase plans, or (v) any other employee contracts or non-terminable (whether
with or without penalty) employment arrangements (each an “Employment
Arrangement”).
Neither the Company nor any of its Subsidiaries is in default with respect to
any material term or condition of any Employment Arrangement, and the
transactions contemplated by this Agreement will not result in any such default,
including after the giving of notice, lapse of time or both. Neither the Company
nor any of its Subsidiaries is delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Upon termination of the employment of any of those
employees, neither the Company nor any of its Subsidiaries would by reason of
the transactions contemplated by this Agreement or anything done prior to the
Closing, be liable to any of those employees for so-called “severance pay” or
any other payments. Neither the Company nor any of its Subsidiaries has any
policy, practice, plan or program of paying severance pay or any form of
severance compensation in connection with the termination of employment. The
Company and each of its Subsidiaries is in compliance in all material respects
with all Applicable Laws respecting labor, employment, fair employment
practices, work place safety and health, terms and conditions of employment, and
wages and hours. There are no, and have never been, any charges or threatened
charges of employment discrimination or unfair labor practices against or
involving the Company or any of its Subsidiaries. There are no material
grievances, complaints or charges that have been filed against the Company or
any of its Subsidiaries under any dispute resolution procedure and there is no
arbitration or similar proceeding pending and, to the knowledge of the Company,
no claim therefor has been asserted. Except as set forth on Schedule
3.23(c), the
Company and each of its Subsidiaries has in place all employee policies required
by Applicable Laws, and there have been no material violations or alleged
violations of any of such policies. To the knowledge of the Company, none of the
Company, any of its Subsidiaries nor any of the Principals have received any
notice indicating that any of the Company’s or any of its Subsidiary’s
employment policies or practices are currently being audited or investigated by
any Governmental Authority. The Company and each of its Subsidiaries are, and at
all times since November 6, 1986 have been, in compliance with the requirements
of the Immigration Reform Control Act of 1986.
(d) No
officer or director of the Company or any of its Subsidiaries (including the
Principals) has been: (i) subject to voluntary or involuntary petition under any
bankruptcy or
insolvency
laws or the appointment of a receiver, fiscal agent or similar officer by a
court for his or her business or property or that of any partnership of which he
or she was a general partner or any corporation or business association of which
he or she was an executive officer; (ii) convicted in a criminal proceeding or
named as a subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses) or been otherwise accused of any act of
moral turpitude; (iii) the subject of any order, judgment, or decree (not
subsequently reversed, suspended or vacated) of any court of competent
jurisdiction permanently or temporarily enjoining him or her from, or otherwise
imposing limits or conditions on his or her ability to engage in any securities,
investment advisory, banking, insurance or other type of business or acting as
an officer or director of a public company; (iv) found by a court of competent
jurisdiction in a civil action or by the SEC or the Commodity Futures Trading
Commission to have violated any federal, provincial or state commodities,
securities or unfair trade practices law, which judgment or finding has not been
subsequently reversed, suspended, or vacated; or (vi) has engaged in other
conduct that would be required to be disclosed in a prospectus under Item 401(f)
of SEC Regulation S-K
Section
3.24. Insurance. The
Company and its Subsidiaries maintain in full force and effect insurance as
listed on Schedule 3.24, which
includes all bonds and insurance required by ERISA and by any contract to which
the Company or any of its Subsidiaries is a party. Neither the Company nor any
of its Subsidiaries is in default under any such insurance policy. Except as
identified on Schedule 3.24, each
such insurance policy or equivalent policies will remain in full force and
effect after the Closing, with the Company or one of its Subsidiaries as the
sole owner and beneficiary of each such policy.
Section
3.25. Powers
of Attorney. Except
as granted under Section 11.13 and under the Representation Agreements, neither
the Company nor any of the Principals has any outstanding power of attorney with
respect to any interest in the Company. Pursuant to the Representation
Agreements, the Company and each Principal has all requisite power and authority
to execute and deliver this Agreement, and to perform the transactions
contemplated by this Agreement (including the delivery of the Other Shares to
the Buyer in accordance with Section 2.3), on behalf of each Other Shareholder.
Section
3.26. Finder’s
Fee. Except
for Berkshire Capital Securities LLC, whose fees will be paid by the Principals,
there is no investment banker, broker, finder or other intermediary that has
been retained by or is authorized to act on behalf of the Company, any
Subsidiary or any Principal who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
Section
3.27. Non-Foreign
Status. None of
the Company or any of the Shareholders is a “foreign person” within the meaning
of Section 1445 of the Code and Treasury Regulations Section 1.1445-2, and no
interest in the Company is a “United States real property interest” within the
meaning of Section 897 of the Code.
Section
3.28. Corporate
Records; Copies of Documents. The
Records accurately record in all material respects all corporate or company
action taken by their respective shareholders and directors of the Company and
its Subsidiaries, and true and complete copies of the originals of those
documents have been provided to the Buyer for review. The Company and its
Subsidiaries
have provided Buyer and its counsel true and correct copies of all documents
referred to in this Agreement or in the Schedules delivered to the Buyer in
connection herewith.
Section
3.29. Disclosure.
(a) None of
the representations or warranties or other statements of the Company or any of
the Principals contained in this Agreement, in any schedule or exhibit hereto or
in any certificate or other document delivered under the provisions of this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein not
misleading. To the knowledge of the Company, the documents and information
provided or made available to the Buyer and its representatives in response to
written inquiries and requests made by the Buyer or any of its representatives
in connection with the evaluation, negotiation or documentation of the
transactions contemplated by this Agreement, have been responsive in all
material respects to those inquiries and requests, such that, upon the receipt
of those documents and that information, when taken together with the documents
provided or made available to the Buyer under the document index entitled,
“Project Peabody - Due Diligence List”, the Buyer was in possession of all
documents and information necessary to provide a reasonable Person in all
material respects with a fully-informed understanding of the subject matter of
those inquires and requests.
(b) None of
the information in the Proxy Statement (other than any information to be
supplied by or on behalf of Buyer or its Affiliates for inclusion therein) will,
at the time any such Proxy Statement is mailed to the shareholders of the
applicable Mutual Fund, or at the time of the meeting of the shareholders of
such Mutual Fund, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE
IV.
REPRESENTATIONS
AND WARRANTIES OF EACH PRINCIPAL
As a
material inducement to the Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, each Principal hereby severally makes to the
Buyer, as of the date of this Agreement and as of the Closing, the
representations and warranties set forth in this Article IV.
Section
4.1. Ownership
Interests. Such
Principal owns of record and beneficially the Shares ascribed to such Principal
on Schedule
4.1 and such
Shares are duly authorized, validly issued and free and clear of any
Encumbrances and any other limitation or restriction (including any restriction
on the right to vote, sell or otherwise dispose of the Shares). Those Shares are
the only Company Securities held by the Principal or with respect to which the
Principal has any rights. There are no voting trusts, voting agreements, proxies
or other agreements, instruments or undertakings with respect to the management
or control of the Company to which the Company or the Principal is a party. The
Principal has not granted any power of attorney with respect to any interests in
the Company.
Section
4.2. Authority. The
Principal has full right, authority, power and capacity to enter into this
Agreement and each agreement, document and instrument to be executed and
delivered by or on behalf of such Principal pursuant to, or as contemplated by,
this Agreement and to carry out the transactions contemplated hereby and
thereby. This Agreement and each agreement, document and instrument executed and
delivered by the Principal pursuant to this Agreement constitutes, or when
executed and delivered will constitute, a valid and binding obligation of the
Principal, enforceable in accordance with its respective terms, except as
enforceability may be restricted, limited or delayed by applicable bankruptcy or
other laws affecting creditors’ rights generally or by equitable principles. The
execution, delivery and performance of this Agreement and each such agreement,
document and instrument:
(a) does not
and will not violate any Applicable Laws, or, except as set forth on
Schedule
3.4, require
the Principal to obtain any approval, consent or waiver from, or make any filing
with, any Person or Governmental Authority; and
(b) except as
set forth on Schedule
3.4, does
not and will not result in a breach of, constitute a default under, accelerate
any obligation under, or give rise to a right of termination of, any agreement,
contract, instrument, mortgage, lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award to which the
Principal is a party or by which the property of the Principal is bound or
affected, or result in the creation or imposition of any Encumbrance on any
assets of the Principal.
Section
4.3. Finder’s
Fee. Except
for Berkshire Capital Securities LLC, whose fees will be paid by the Principals,
there is no investment banker, broker, finder or other intermediary that has
been retained by or is authorized to act on behalf of the Company, any
Subsidiary or any Principal who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
Section
4.4. Investment
Advisory Representation. Except
for Investment Management Services provided by the Principal for his own account
or the account of his Immediate Family and that the Principal is managing
without a fee or any other remuneration, the Principal does not provide
Investment Management Services to any Person other than on behalf of the Company
and its Subsidiaries pursuant to an investment advisory or management agreement
between the Company or one of its Subsidiaries and a customer or client
thereof.
Section
4.5. Agreements. The
Principal is not a party to any employment, non-competition, trade secret or
confidentiality agreement, arrangement, understanding or obligation with or to
any Person other than the Company or one of its Subsidiaries. There are no
agreements or arrangements not disclosed in a Schedule to this Agreement, to
which the Principal is a party relating to the business of the Company, any of
its Subsidiaries, or to the Principal’s direct or indirect rights and
obligations as a shareholder, partner, officer or employee of the Company. The
execution, delivery and performance of this Agreement will not violate or result
in a default or acceleration of any obligation under any contract, agreement,
indenture or other instrument involving the Company or any of its Subsidiaries
to which the Principal is a party.
Section
4.6. Employment
Date. The
Principal’s (i) date of birth, and (ii) date of commencement of employment
with the Company are accurately reflected in Schedule 4.6.
Section
4.7. Non-Foreign
Status. The
Principal is not a “foreign person” within the meaning of Section 1445 of the
Code and Treasury Regulations Section 1.1445-2.
ARTICLE
V.
REPRESENTATIONS
AND WARRANTIES OF EACH OTHER SHAREHOLDER
AND EACH
PRINCIPAL REGARDING THE OTHER SHAREHOLDERS.
As a
material inducement to the Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, each Principal and each Other Shareholder
hereby severally makes to the Buyer, as of the date of this Agreement and as of
the Closing, each of the representations and warranties set forth in this
Article V:
Section
5.1. Ownership
Interests. Each
Other Shareholder owns of record and beneficially the Other Shares ascribed to
that Other Shareholder on Schedule
5.1 and
those Other Shares are free and clear of any Encumbrances and any other
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of those Other Shares). Those shares are the only Company
Securities held by the Other Shareholder or with respect to which the Other
Shareholder has any rights. There are no voting trusts, voting agreements,
proxies or other agreements, instruments or undertakings with respect to the
management or control of the Company to which the Other Shareholder is a party.
Except as provided in the Representation Agreement and Section 12.13 of this
Agreement, the Other Shareholder has not granted any power of attorney with
respect to any interests in the Company.
Section
5.2. Authority. Each
Other Shareholder has full right, authority, power and capacity to sell and
deliver to the Buyer the Other Shares ascribed to the Other Shareholder on
Schedule
5.1, to
enter into this Agreement, the Representation Agreement and each agreement,
document and instrument to be executed and delivered by or on behalf of the
Other Shareholder pursuant to, or as contemplated by, this Agreement, the
Representation Agreement and to carry out the transactions contemplated hereby
and thereby. This Agreement, the Representation Agreement and each agreement,
document and instrument executed and delivered by the Other Shareholder pursuant
to such agreement constitutes, or when executed and delivered will constitute, a
valid and binding obligation of the Other Shareholder, enforceable in accordance
with its respective terms, except as enforceability may be restricted, limited
or delayed by applicable bankruptcy or other laws affecting creditors’ rights
generally or by equitable principles. The execution, delivery and performance of
this Agreement, the Representation Agreement and each agreement, document and
instrument and the sale and delivery to the Buyer of the Other Shares ascribed
to the Other Shareholder on Schedule
5.1, does
not and will not violate any laws of the United States or any state or other
jurisdiction applicable to the Company, or, require the Company to obtain any
approval, consent or waiver from, or make any filing with, any Person, and (b)
does not and will not result in a breach of, constitute a default under,
accelerate any obligation under, or give rise to a right of termination of, any
agreement, contract,
instrument,
mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award which the property of the Other
Shareholder is bound or affected, or result in the creation or imposition of any
Encumbrance on any assets of the Other Shareholder.
Section
5.3. Finder’s
Fee. Except
for Berkshire Capital Securities LLC, whose fees will be paid by the Principals,
there is no investment banker, broker, finder or other intermediary that has
been retained by or is authorized to act on behalf of the Company, any
Subsidiary or any Shareholder who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
ARTICLE
VI.
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
As a
material inducement to the Principals to enter into this Agreement and
consummate the transactions contemplated hereby, the Buyer hereby makes to the
Principals, as of the date of this Agreement and as of the Closing, the
representations and warranties set forth in this Article VI.
Section
6.1. Organization. The
Buyer is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Rhode Island and has all corporate powers and all
material governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted.
Section
6.2. Authority;
No Violation.
(a) The
execution, delivery and performance by the Buyer of this Agreement and the
consummation of the transactions contemplated hereby are within the corporate
powers of the Buyer and have been duly authorized by all necessary corporate
action on the part of the Buyer. This Agreement constitutes a valid and binding
obligation of the Buyer enforceable against it in accordance with their terms,
except as enforceability may be restricted, limited or delayed by applicable
bankruptcy or other laws affecting creditors’ rights generally or by equitable
principles.
(b) The
execution, delivery and performance by the Buyer of this Agreement and the
consummation of the transactions contemplated hereby do not and will not (i)
violate the articles of incorporation or bylaws of the Buyer or (ii) assuming
compliance with the matters referred to in Section 6.3, violate any Applicable
Law.
Section
6.3. Consents
and Approvals. The
execution, delivery and performance by the Buyer of this Agreement and the
consummation of the transactions contemplated hereby require no material action
by or in respect of, or material filing with, any Governmental Authority other
than (i) compliance with any applicable requirements of the Exchange Act and
(ii) filing with, notification to, or the consent of, (A) the Board of Governors
of the Federal Reserve System, (B) the Federal Deposit Insurance Corporation,
(C) the Rhode Island Department of Business
Regulation
- Division of Banking, (D) the Massachusetts Department of Insurance and (E) the
National Association of Securities Dealers, Inc.
Section
6.4. No
Actions, Suits or Proceedings. There
is no action, suit or proceeding pending, or, to the knowledge of the Buyer,
threatened against the Buyer, or before any Governmental Authority that
questions the validity or legality of this Agreement or of the transactions
contemplated hereby, or that seeks to prevent the consummation of the
transactions contemplated by this Agreement.
Section
6.5. Financial
Ability. The
Buyer has, or will have on or before the Closing Date, sufficient cash,
available lines of credit and other sources of immediately available funds to
enable it to pay the Purchase Price.
Section
6.6. No
Other Broker. Other
than Sandler X’Xxxxx & Partners, L.P., the fees and expenses of which will
be paid by the Buyer or one of its Affiliates, there is no investment banker,
broker, finder or other intermediary that has been retained by or is authorized
to act on behalf of the Buyer in connection with the transactions contemplated
by this Agreement.
Section
6.7. Eligibility
to Make Election under Bank Holding Company Act. The
Buyer is not aware of any legal impediment to its right to make an election in
accordance with Section 4(l) of the Bank Holding Company Act of 1956, as
amended, to be treated as a financial holding company effective on or prior to
the occurrence of the Closing.
ARTICLE
VII.
COVENANTS
Section
7.1. Conduct
of Business.
(a) From the
date of this Agreement until the Closing, the Company and its Subsidiaries
shall, the Principals shall cause the Company and its Subsidiaries to, and the
Company shall use its reasonable best efforts to cause the Mutual Funds
to:
(i) xxxx and
collect accounts receivable, pay expenses and generally carry on business in the
ordinary course of business consistent with past practice;
(ii) preserve
their respective present business organizations and relationships;
(iii) keep
available the present services of their employees;
(iv) preserve
the rights, franchises, goodwill and relationships of their clients, customers
and others business partners;
(v) maintain
the insurance policies and bonds listed on Schedule 3.24 or
procure comparable replacement policies and maintain those replacement policies;
and
(vi) file on a
timely basis all Tax Returns required to be filed by it for all periods ending
on or before the Closing Date and to pay on a timely basis all Taxes that are
due and payable with respect to the Company and its Subsidiaries.
(b) Without
limiting the generality of Section 7.1(a), and except as otherwise expressly
contemplated by this Agreement, from the date of this Agreement until the
Closing, the Company and its Subsidiaries shall not, the Principals shall cause
the Company and its Subsidiaries not to:
(i) (A)
split, combine or reclassify any shares of their capital stock or issue,
authorize, or propose the issuance of, any securities in respect of, in lieu of,
or in substitution for, shares of capital stock of the Company and any of its
Subsidiaries, or (B) repurchase, redeem or otherwise acquire any shares of the
capital stock of the Company or any of its Subsidiaries, including Company
Securities and Subsidiary Securities;
(ii) issue,
deliver or sell, or authorize or propose the issuance, delivery or sale of, any
Company Securities or Subsidiary Securities, or any rights, warrants or options
to acquire, any such shares, or enter into any agreement with respect to any of
the Company Securities or Subsidiary Securities;
(iii) amend the
Company Organizational Documents, the articles of incorporation or by-laws or
other comparable governing documents of any of its Subsidiaries;
(iv) authorize
capital expenditures that, in the aggregate, exceed $50,000, without the prior
written consent of the Parent, which consent may not be unreasonably
withheld;
(v) enter
into any new line of business;
(vi) acquire,
by merging or consolidating with, or by purchasing a substantial equity interest
in or a substantial portion of the assets of, or by entering into any other
transaction with, any Person or acquire any assets that would be material,
either individually or in the aggregate, to the Company and its
Subsidiaries;
(vii) change
any method, policies or procedures of accounting, except as required by changes
in GAAP or regulatory accounting principles;
(viii) amend,
modify, waive any right in respect of or terminate any agreement listed in
Schedule 3.6(a), or,
where not listed therein, any contract or agreement to which any Client is a
party, including with regard to the fees chargeable under any of those
agreements;
(ix) enter
into, amend, modify, waive any right in respect of or terminate any material
agreement;
(x) make any
Tax election or settle or compromise any federal, state, local or foreign Tax
liability or take any action that would prevent any of the Mutual
Funds
from qualifying as a “regulated investment company”, within the meaning of
Section 851 of the Code;
(xi) pay,
discharge or satisfy any claim, liability or obligation, other than obligations
arising in the ordinary course of business consistent with past
practice;
(xii) settle or
compromise any litigation or legal or other action, suit, proceeding or
investigation involving or in any way affecting the Company or any of its
Subsidiaries or any of the Mutual Funds;
(xiii) adopt,
amend, renew or terminate any plan or any agreement, arrangement, plan or policy
between the Company or any Subsidiary on the one hand, and one or more of its
current or former directors, officers or, employees or consultants;
(xiv) increase
in any manner the compensation or fringe benefits of any director, officer,
employee or consultant, or pay any benefit not required by any plan or agreement
as in effect as of the date of this Agreement (including, without limitation,
the granting of stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units or shares);
(xv) hire new
management employees;
(xvi) enter
into, modify or renew any employment, severance or other agreement with any
director, officer, employee or consultant of the Company or any of its
Subsidiaries or establish, adopt, enter into or amend any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement providing for any
benefit to any director, trustee, officer, employee or consultant of the Company
or any of its Subsidiaries or any of the Mutual Funds;
(xvii) sell,
lease, encumber, assign or otherwise dispose of, any of the assets, properties
or other rights of the Company, any of its Subsidiaries or any of the Mutual
Funds, other than in the ordinary course of business consistent with past
practice;
(xviii) incur any
indebtedness for borrowed money or assume, guarantee, endorse, or otherwise as
an accommodation become responsible for, the liabilities or obligations of any
Person, or make any loan or advance to any Person or waive any rights with
respect to any existing loans;
(xix) take, or
fail to take, any action that constitutes a breach or default under any
contract, agreement or license to which the Company or any of its Subsidiaries
is a party or by which any of them or any of their respective properties is
bound;
(xx) make any
contribution to or investment in any Person;
(xxi) enter
into or renew, amend or terminate, or give notice of a proposed renewal,
amendment or termination of, or make any other commitment with respect to, any
Lease; or
(xxii) agree to
do any of the foregoing.
(c) Without
limiting the generality of Section 7.1(a) or Section 7.1(b), and except as
otherwise expressly contemplated by this Agreement, from the date of this
Agreement until the Closing, the Company shall use its reasonable best efforts
to cause the Mutual Funds to operate their respective businesses, only in the
usual, regular and ordinary course and in accordance with past practice, conduct
their respective businesses in a manner comporting with the standards of service
quality heretofore met by them and to maintain the goodwill of the investors in
each of the Mutual Funds. Without limiting the foregoing, from the date hereof
until the Closing, the Company shall use its reasonable best efforts to ensure
that no Mutual Fund will:
(i) incur any
material indebtedness for borrowed money, issue or sell any debt securities or
prepay any debt;
(ii) have any
action taken by its trustee(s) that would be reasonably expected to have a
material effect on such Mutual Fund;
(iii) mortgage,
pledge or otherwise subject to any encumbrance other than a Permitted
Encumbrance, any of its properties or assets, tangible or
intangible;
(iv) forgive
or cancel any material debts or claims, or waive any material rights, except in
exchange for fair value
(v) enter
into any material agreement, commitment or other transaction (other than in
connection with the transactions contemplated hereby);
(vi) pay any
bonus to any officer, director, partner, stockholder, employee, sales
representative, or agent of any Mutual Fund or grant to any such person any
other increase in compensation in any form;
(vii) except as
may be required by Applicable Law and after notice to the Buyer, adopt or amend
any employment, collective bargaining, bonus, profit-sharing, compensation,
stock option, pension, retirement, deferred compensation or other plan,
agreement, trust, fund or arrangement for the benefit of officers, directors,
trustees, partners, stockholders, employees, sales representatives or agents of
any Mutual Fund;
(viii) amend any
of its Mutual Fund Governing Documents;
(ix) change in
any material respect its accounting practices, policies or principles, except as
may be required by Applicable Law or GAAP;
(x) incur any
material liability or obligation (whether absolute, accrued, contingent or
otherwise and whether direct or as guarantor or otherwise with respect to the
obligations of others);
(xi) make any
changes in selling policies or practices relating or other terms of sale or
accounting therefor or in policies of employment unless required by Applicable
Law;
(xii) enter
into any type of business not conducted as of the date of this Agreement or
create or organize any subsidiary or enter into or participate in any joint
venture or partnership;
(xiii) enter
into any agreement or transaction with an Affiliate or make any amendment or
modification to any such agreement unless required by Applicable Law;
or
(xiv) agree or
commit to do any of the foregoing.
(d) Without
limiting the generality of Sections 7.1(a), (b) or (c), from the date of this
Agreement until the Closing, neither the Company nor any of the Principals shall
take or omit to take, and the Company shall use its reasonable best efforts to
cause the Mutual Funds not to take or omit to take, any action that is intended
to or results in, or may reasonably be expected to result in, any of the
representations and warranties set forth in Articles III, IV or V being or
becoming untrue or incorrect in any respect at any time during that period.
Section
7.2. Public
Announcements. The
parties shall agree upon the form and substance of any press release or other
public disclosure related to this Agreement or any of the transactions
contemplated hereby and shall not issue any such press release or make such a
public disclosure without the consent of the other parties, which consent shall
not be unreasonably withheld; provided,
however, that
nothing prohibits any party, following notification to the other parties if
practicable, from making any disclosure that is required under any Applicable
Law.
Section
7.3. Access;
Certain Communication.
(a) From the
date of this Agreement until the Closing, subject to Applicable Laws relating to
the exchange of information and applicable client confidentiality requirements,
the Company and the Principals shall afford to the Buyer and its authorized
agents and representatives, complete access, upon reasonable notice and during
normal business hours, to the offices and properties, contracts, documents,
information, customers, clients and personnel of the Company, its Subsidiaries
and the Mutual Funds. The Company shall, and the Principals shall cause the
Company and its personnel to, provide assistance to the Buyer in the
investigation of matters relating to this Agreement and the transactions
contemplated hereby; provided, that
the investigation is conducted in a manner that does not unreasonably interfere
with normal operations, customers and employee relations.
(b) No
information directly or indirectly obtained as a result of the access or
investigations permitted in this Section 7.3 shall affect or limit the
representations and warranties set forth in this Agreement or any certificate or
other document delivered in connection herewith.
Section
7.4. Reasonable
Best Efforts; Further Assurances.
(a) Subject
to the terms and conditions of this Agreement, the Buyer, the Company and the
Principals shall use their respective reasonable best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary or
desirable under Applicable Law to fulfill the conditions set forth in Sections
8.1 and 8.3 (in the case of the obligations of the Company and the Principals
under this Section 7.4) and Sections 8.2 and 8.3 (in the case of the obligations
of the Buyer under this Section 7.4). Without limiting the generality of the
foregoing, (i) the Company and the Principals shall cause the Real Estate
Separation to occur prior to the Closing and (ii) the Buyer shall take the steps
necessary to make an election in accordance with Section 4(l) of the Bank
Holding Company Act of 1956, as amended, to be treated as a financial holding
company on or prior to the Closing.
(b) The Buyer
and the Principals agree, and the Principals, prior to the Closing, and the
Buyer, after the Closing, agree to cause the Company and each of its
Subsidiaries, to execute and deliver such documents, certificates, agreements
and other writings and to take such actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement.
Section
7.5. Regulatory
Matters; Third Party Consents.
(a) Subject
to the terms of Sections 7.5(b) and (c) and 12.1(b), the Company and the
Principals, on the one hand, and the Buyer, on the other hand, shall cooperate
with each other and use all commercially reasonable efforts promptly to prepare
and file all necessary documentation, to effect all applications, notices,
petitions and filings, and to obtain as promptly as practicable all permits,
consents, approvals, waivers and authorizations of all third parties and
Governmental Authorities that are necessary to consummate the transactions
contemplated by this Agreement. Subject to Applicable Laws regarding the
exchange of information, the Buyer and the Company will have the right to review
in advance, and will consult with the other on, all the information relating to
the Buyer or the Company, as the case may be, and any of their respective
Affiliates, that appears in any filing made with, or written materials submitted
to, any third party or any Governmental Authority in connection with the
transactions contemplated by this Agreement.
(b) As soon
as reasonably practicable and in any event by the fifth Business Day following
the date of this Agreement, the Company shall, and the Principals shall cause
the Company to, (i) inform the Clients of the transactions contemplated by this
Agreement and (ii) deliver to each of them a Client Consent Request. Any
Client Consent Request in the form of Exhibit
A that is
timely delivered to a Client will be a valid Client Consent Request the purposes
of this Section 7.5. Prior to the Closing, the Company and the Principals shall
use their respective reasonable best efforts to obtain Client Consents from each
of the Clients and the New Clients.
(c) Promptly
following execution of this Agreement, the Company shall use its reasonable best
efforts to secure the approvals of the respective boards of trustees of the
Mutual Funds with respect to (i) continuing existing advisory and distribution
arrangements (including any agreements related to plans of distribution pursuant
to Rule 12b-1 under the Investment Company Act) for the Mutual Funds following
the consummation of the transactions contemplated by this Agreement, (ii)
calling a meeting of shareholders of the Mutual Funds to vote on such of the
foregoing matters as may require their approval under Applicable Law or the
Mutual Fund Governing Documents and (iii) the preparation and filing of proxy
materials (the “Proxy
Statement”)
relating to the matters to be considered at the foregoing shareholder meeting
and the subsequent solicitation of shareholders of the Mutual Funds with respect
to the matters to be considered at the aforementioned shareholder meeting, as
soon as reasonably practicable following those approvals. The Company shall also
use its reasonable best efforts to secure such approvals or meet such other
conditions as may be necessary for the continuation or maintenance of any other
current agreements or other arrangements with respect to the Mutual Funds that
would terminate or otherwise be materially altered as a result of the
consummation of the transactions contemplated by this Agreement. The Company and
the Principals covenant and agree that any material provided by the Company or
the Mutual Funds that is included in the Proxy Statement, any supplement thereto
or any related soliciting materials shall comply in all material respects with
Applicable Law and shall be accurate and complete and not contain any untrue
statement of material fact, or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading. The Company shall assist,
in a manner compliant with Applicable Law, in the solicitation of proxies for
the aforementioned shareholder meeting and shall use its best efforts to obtain
approval of the proposals set forth in the Proxy Statement.
Section
7.6. Employee
Matters.
(a) For a
period of not less than five full fiscal years after the Closing, the Acquired
Business shall maintain a cash bonus plan for key employees of the Acquired
Business, including the Principals (that plan, the “Bonus
Plan”).
Promptly following the end of each fiscal year of the Buyer that the Bonus Plan
is in effect, the Acquired Business shall establish in accordance with the terms
of the Bonus Plan an aggregate annual bonus pool equal to 20% of the
consolidated pretax operating income of the Acquired Business for that fiscal
year (“Acquired
Business Pretax Income”), as
set forth on internally prepared financial statements of the Buyer that are
derived from the books and records of the Acquired Business and other members of
the Combined Buyer Group and prepared in accordance with the accounting policies
of practices of the Buyer that are used in the preparation of internal financial
statements of other members and business divisions of the Combined Buyer Group.
Subject to the prior written consent of the president or the chief executive
officer of the Buyer, the Principals may allocate the bonus pool for a
particular fiscal year when the Bonus Plan is in effect among eligible key
employees of the Acquired Business in their reasonable discretion as long as any
Person receiving any payment under the Bonus Plan is an employee of the Buyer or
one of its Affiliates at the time the allocation is made and at the time
payments in respect of the bonus pool are made.
(b) For
purposes of calculating Acquired Business Pretax Income there shall not be taken
into account the effect of any Existing-Business Transfer (which accordingly
shall be deemed not to have occurred), except that,
subject to the obtaining of any consent required
under
Section 2.6(e) during the Earnout Period, with respect to an Existing-Business
Transfer to the Acquired Business, Acquired Business Pretax Income shall be
adjusted to take into account in each applicable fiscal year an amount equal to
the difference (which may be positive or negative) of (A) the net increase or
decrease in Acquired Business Pretax Income that is attributable to that
Existing-Business Transfer during the applicable fiscal year minus (B) the
net positive or negative contribution to the consolidated pretax operating
income of the Buyer and its Affiliates for the twelve-months prior to the date
of that Existing-Business Transfer that was attributable to the client or
customer account (or any assets therein or services with respect thereto) or
business division, product or service that is the subject of the applicable
Existing-Business Transfer; provided that the
foregoing adjustment shall not apply to any net increase or decrease in Acquired
Business Pretax Income that is attributable to post-Closing contributions to the
assets under management in any client or customer account by the underlying
client or customer. In cases of contributions of the type described in the
preceding proviso clause, the full amount of the net increase or decrease in
Acquired Business Pretax Income shall be taken into account.
(c) Subject
to the provisions of any Applicable Law (including ERISA), the Buyer and the
Company shall use their commercially reasonable efforts (i) to permit employees
of the Company and its Subsidiaries (i) to maintain their accounts in the
Company's 401(k) plan in the Mutual Funds and (ii) make one or more of the
Mutual Funds available as an investment option to those employees under the
Company’s 401(k) plan for at least three full calendar years following December
31, 2005.
(d) If at any
time following the Closing, any employee of the Company performs any services or
devotes any of his working time during his normal working hours for the Company
on behalf any of the Real Estate Subsidiaries or Real Estate Partnerships, the
Principals will cause the applicable Real Estate Subsidiary or Real Estate
Partnership to reimburse the Company for those services and that time in an
amount equal to their fair value, which the Buyer and the Principals shall
determine in good faith.
Section
7.7. Notification
of Certain Matters. The
Company and the Principals shall give prompt notice to the Buyer
of:
(a) any
notice or other communication from any Person other than a Client suggesting
that the consent of that Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any
notice or other communication from any Governmental Authority relating to the
transactions contemplated by this Agreement;
(c) any
actions, suits, claims, investigations or proceedings commenced or, to the
knowledge of the Company, threatened against, relating to, affecting or
otherwise involving the Company, any of its Subsidiaries or any of the
Principals that (i) if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 3.15 or (ii) relate to
the consummation of the transactions contemplated by this
Agreement;
(d) any
notice or other communication from any Person that any Client has terminated or
has substantially reduced, or intends to terminate or substantially reduce, the
Client’s account and/or business relationship with the Company or any of its
Subsidiaries;
(e) any
development causing a breach of any of the representations or warranties set
forth in Articles III, IV, or V.
No
disclosure pursuant to this Section 7.7 will be deemed to amend or
supplement any of the Schedules to this Agreement or to prevent or cure any
misrepresentation, breach of warranty or breach of covenant by the Company or
any of the Shareholders.
Section
7.8. Changes
in Assets Under Management.
Contemporaneously with the delivery of the Revised Client Revenue Schedule under
Section 2.2(a), the Company shall deliver to the Buyer a report setting forth
(a) a description of any material fee changes (including, without limitation,
any caps, waivers, offsets or reimbursements) with respect to any of the Client
Accounts and the Mutual Funds and (b) a description of any material changes in
the amount of assets in a Client Account or Mutual Fund as a result of deposits
or withdrawals made to or from that Client Account or Mutual Fund, in each case
from the Base Date until the close of business on the third business day prior
to the Closing Date, and a description of any such fee or asset changes proposed
or otherwise expected to be instituted thereafter (it being understood and
agreed that, solely for purposes of this Section 7.8, net deposits or
withdrawals with respect to any Client Account or Mutual Fund in the aggregate
in excess of $50,000 shall be deemed material).
Section
7.9. Maintenance
of Records.
(a) From the
date of this Agreement until the Closing, the Company shall, and the Principals
shall cause the Company and its Subsidiaries to, maintain the Records in the
same manner and with the same care that the Records have been maintained prior
to the execution of this Agreement. From and after the Closing Date, each of the
parties shall permit the other parties reasonable access to any applicable
Records in their possession relating to matters arising on or before the Closing
Date to the extent necessary to assist the requesting party access in connection
with any claim, action, litigation or other proceeding involving that party or
any legal obligation owed by that party to any present or former client or
customer of the Company or any of its Subsidiaries.
(b) For a
period of six years from the Closing Date, no Principal shall dispose of or
destroy any business records or files relating to Taxes or Tax Returns that
pertain to the Company or any of its Subsidiaries without first offering to turn
over possession of those records or files to the Company by written notice to
the Company and the Buyer at least thirty (30) days prior to any such
disposition or destruction.
Section
7.10. Non-Competition/Non-Solicitation.
(a) For a
period of six full years following the Closing Date (the “Restricted
Period”), as
defined below, each Principal shall not, other than for the benefit of the Buyer
and its Affiliates, directly or indirectly, whether as owner, partner,
shareholder, director, consultant, agent, employee, co-venturer or otherwise,
engage, own, operate, participate or invest in any
business
or activity anywhere in the Designated Territory that develops, markets, sells,
offers or provides any products or services that are competitive with or similar
to any products or services that are developed, marketed, sold, offered or
provided by the Acquired Business.
(b) During
the Restricted Period, each Principal shall not, other than for the benefit of
the Buyer and its Affiliates, directly or indirectly, in any manner, (i) call
upon, solicit, accept, divert or take away any of the customers, clients,
business partners, prospective customers, clients or business partners of the
Company or the Buyer or any of their respective Affiliates, (ii) hire any
employee or consultant of the Company, (or any Person who was an employee or
consultant of the Company or the Buyer or any of their respective Affiliates at
any time during the six months prior to the end of the Restricted Period) or the
Buyer or any of their respective Affiliates or solicit, entice or attempt to
persuade any of those employees or consultants to leave the services of the
Company or the Buyer or any of their respective Affiliates for any reason or
(iii) disparage the Company or the Buyer or any of their respective Affiliates
to any employee or consultant of the Company or the Buyer or any of their
respective Affiliates or to any customer, client or business partner or
prospective customer, client or business partner of the Company or the Buyer or
any of their respective Affiliates.
(c) In the
event that any term or provision of this Section 7.10 shall be determined
to be illegal, invalid or unenforceable, the remainder of this Section 7.10
shall be enforced to the fullest extent possible and the illegal, invalid or
unenforceable term or provision shall be interpreted to reflect the parties’
original intent as nearly as possible without being illegal, invalid or
unenforceable. If such amendment or interpretation is not possible, the illegal,
invalid or unenforceable provision or portion of a provision will be severed
from the remainder of this Section 7.10 and the remainder of this Section 7.10
shall be enforced to the fullest extent possible as if such illegal, invalid or
unenforceable provision or portion of a provision were not
included.
Section
7.11. Non-Solicitation
of Other Offers. From
the date of this Agreement until the Closing or the termination of this
Agreement under Article XI, whichever is applicable, neither the Company
nor any Principal may, directly or indirectly, solicit, encourage, assist,
initiate or entertain discussions, engage in negotiations with, provide any
information to, or enter into or consummate any agreement or transaction with,
any Person other than the Buyer and/or one or more of its Affiliates concerning
any business combination transaction involving or relating to the Company or any
of its Subsidiaries, including any merger, share exchange, consolidation, sale
of all or substantially all of the assets of the Company or any of its
Subsidiaries or sale of any Company Securities, including the
Shares.
Section
7.12. No
Transfer of Shares. No
Principal will sell, transfer, assign or dispose of any of that Principal’s
Shares other than pursuant to the terms of this Agreement.
Section
7.13. Covenants
With Respect to Section 15(f) of the Investment Company Act.
(a) (a)In
accordance with Section 15(f) of the Investment Company Act, (i) for a period of
three years after the Closing Date, the Buyer shall not cause, and shall use all
commercially reasonable efforts not to permit, any “interested person” (as that
term is defined in the Investment Company Act) of the Buyer or the Company to
become, or to continue as, a
member of
the board of trustees of any of the Mutual Funds, unless, taking into account
that interested person, at least 75% of the members of any such board of
trustees are not interested persons of the Buyer or the Company; and (ii) the
Buyer shall not engage in or cause, and shall use all commercially reasonable
efforts to prevent its Affiliates from engaging in or causing, any act, practice
or arrangement that, as a result of the transactions contemplated by this
Agreement or any express or implied terms, conditions or understandings
applicable thereto, imposes an unfair burden (as that term is used in the
Investment Company Act) on any of the Mutual Funds within the meaning of Section
15(f) of the Investment Company Act.
(b) (b)If the
Company or the Buyer and/or any of their respective Affiliates or the Mutual
Funds shall have obtained an order from the SEC providing an exemption from the
provisions of Section 15(f) of the Investment Company Act or an opinion of
counsel based on judicial precedents under applicable federal law with respect
to the meaning of that section, which opinion is reasonably satisfactory in form
and substance to the Company and the board of trustees of the Mutual Funds, then
this Agreement shall be deemed to be modified to the extent necessary to permit
the Company, the Buyer and their Affiliates to act in a manner consistent with
such exemptive order or legal opinion.
ARTICLE
VIII.
CONDITIONS
TO CLOSING
Section
8.1. Conditions
to Buyer’s Obligations. The
obligations of the Buyer to effect the Closing shall be subject to the following
conditions, any of which may be waived in writing by the Buyer:
(a) (i) The
Company and the Principals shall have performed in all material respects all of
their respective obligations under this Agreement required to be performed by
them on or prior to the Closing, (ii) the representations and warranties of the
Company and the Shareholders contained in this Agreement and in any certificate
or other writing delivered by the Company or any of the Shareholders pursuant
hereto (A) that are qualified by materiality or Material Adverse Effect shall be
true as of the date of this Agreement and at and as of the Closing as if made at
and as of that time, and (B) that are not qualified by materiality or Material
Adverse Effect shall be true in all material respects as of the date of this
Agreement and at and as of the Closing as if made at and as of that time, and
(iii) the Buyer shall have received a certificate signed by the president of the
Company in his capacity as president (and not in his individual capacity) and by
each of the Principals to the foregoing effect;
(b) The
Shareholders shall have delivered to the Buyer valid title to the Shares, free
and clear of any Encumbrances, together with certificates for the Shares duly
endorsed or accompanied by stock powers duly endorsed in blank, with any
required transfer stamps affixed thereto;
(c) The Buyer
shall have received opinions of Xxxxx Xxxxxxx LLP, counsel to the Company and
the Principals, and Xxxxxxxxx Traurig LLP, counsel to the Mutual Funds and
the
Company, each dated the Closing Date, that, between the two of them, containing
the numbered opinions set forth on Exhibit
B-1;
(d) The Buyer
shall have made an election in accordance with Section 4(l) of the Bank Holding
Company Act of 1956, as amended, to be treated as a financial holding company,
and that election shall be effective upon the occurrence of the
Closing;
(e) No
regulatory action shall impose any term, condition or restriction upon the
Company or any of its Subsidiaries or the Buyer or any of its Affiliates that
the Buyer reasonably determines would make it inadvisable for the Buyer to
proceed with the consummation of the transactions contemplated
hereby;
(f) The
respective members of the boards of directors of the Company and each of its
Subsidiaries shall have resigned;
(g) Each
Principal shall be an active employee of the Company and have executed and
delivered to the Buyer an employment agreement in the form of Exhibit
C;
(h) No event
will have occurred (or failed to occur) that has had, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect;
(i) The
consolidated working capital of the Company and its Subsidiaries (determined in
accordance with the principles applicable to the definition of Closing Working
Capital set forth in Section 2.4(a)), will be not less than $450,000 and
the treasurer of the Company in his capacity as such (and not in his individual
capacity) will have delivered a certificate to the Buyer to the foregoing
effect;
(j) All
consents and approvals of the Mutual Funds’ respective boards of trustees and
shareholders and of any other party required under any of the Mutual Fund
Governing Documents, Applicable Law or otherwise with respect to the
continuation or maintenance of any current agreements or other arrangements with
respect to the Mutual Funds that would terminate or otherwise be materially
altered as a result of the consummation of the transaction contemplated by this
Agreement shall have been duly and validly obtained;
(k) The ratio
obtained by dividing (i) Adjusted Fees by (ii)
Reference Fees shall equal or exceed 0.80;
(l) The
Company and the Shareholders shall have completed the Real Estate Separation on
terms and conditions acceptable to the Buyer and shall have delivered to the
Buyer such evidence as it may reasonably request in connection
therewith;
(m) To the
extent necessary for the Parent and its Affiliates to comply as of the Closing
with any applicable requirements of the Bank Holding Company Act of 1956, as
amended, and the rules and regulations thereunder, the Company shall have caused
the composition of the respective boards of trustees of the Mutual Funds to be
reconstituted.
(n) The
Company and the Principals shall have caused Park to become a wholly-owned
Subsidiary of the Company and shall have provided evidence thereof that is
reasonably satisfactory to the Buyer;
(o) Each of
the Principals shall have executed and delivered to the Buyer a general release
and waiver of claims (each, a “Release”) in
form and substance reasonably acceptable to the Buyer; and
(p) The
Company shall have executed (where applicable) and delivered to the Buyer the
following:
(i) certified
copies of resolutions of the board of directors (and, if necessary, the
shareholders) of the Company authorizing the execution of this Agreement and
each of the agreements, documents and instruments contemplated by this Agreement
to which the Company is a party;
(ii) copies of
the Articles of Organization and by-laws of the Company and each of its
Subsidiaries that, in the case of each set of Articles of Organization, are
certified as of a recent date by the Secretary of State of the Commonwealth of
Massachusetts;
(iii) certificates
issued by the Secretary of State of each State in which the Company or any of
its Subsidiaries does business certifying that the Company or the applicable
Subsidiary is in good standing in such State as of the most recent practicable
date;
(iv) true and
correct copies of each of the agreements, documents and instruments contemplated
by this Agreement and all agreements, documents, instruments and certificates
delivered or to be delivered in connection therewith;
(v) certificates
of the secretary of the Company and each of the Subsidiaries certifying as to
matters that are customary in transactions of the type contemplated by this
Agreement;
(vi) from each
Shareholder a “transferor’s certificate of non-foreign status” as provided in
the Treasury Regulations under Section 1445 of the Code outstanding in a form
reasonably acceptable to the Buyer; and
(vii) such
other certificates and documents as are required hereby or are reasonably
requested by the Buyer.
Section
8.2. Conditions
to the Company’s and the Principals’ Obligations. The
obligations of the Principals to effect the Closing shall be subject to the
following conditions, which may be waived in writing by the
Principals:
(a) The Buyer
shall have paid to the Principals the Purchase Price in accordance with
Section 2.3;
(b) (i) The
Buyer shall have performed in all material respects all of its obligations
hereunder required to be performed by it at or prior to the Closing, (ii) the
representations and warranties of the Buyer contained in this Agreement and in
any certificate or other writing delivered by the Buyer pursuant hereto shall be
true in all material respects as of the date of this Agreement and at and as of
the Closing as if made at and as of that time and (iii) the Principals shall
have received a certificate signed by the president or chief executive officer
of the Buyer in his capacity as such (and not in his individual capacity) to the
foregoing effect;
(c) The
Shareholders shall have received the opinion of Xxxxxxx Procter LLP, counsel to
the Buyer, dated the Closing Date, contained the numbered opinions set forth on
Exhibit
B-2;
(d) The Buyer
shall have executed and delivered to the Company, as applicable, the
following:
(i) certified
copies of votes of the board of directors of the Buyer authorizing the execution
of this Agreement and each of the other agreements, documents or instruments
contemplated hereby to which the Buyer is a party; and
(ii) true and
correct copies of each of the agreements, documents and instruments contemplated
hereby to which the Buyer is a party, and all agreements, documents, instruments
and certificates delivered or to be delivered in connection therewith by the
Buyer.
Section
8.3. Mutual
Conditions. The
obligations of each of the Principals and the Buyer to effect the Closing shall
be subject to the following conditions:
(a) (i)
No order,
injunction or decree issued by any court or other Governmental Authority of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated by this Agreement shall be in
effect; (ii) no proceeding initiated by any Governmental Authority seeking an
injunction of the transactions contemplated by this Agreement shall be pending;
and (iii) no statute, rule, regulation, order, injunction or decree shall have
been proposed, enacted, entered, promulgated or enforced by any Governmental
Authority that prohibits, restricts or makes illegal consummation of the
transactions contemplated by this Agreement; and
(b) All
regulatory approvals, actions and consents required to consummate the
transactions contemplated hereby and for the Buyer to operate the businesses of
the Company and its Subsidiaries following the Closing as currently conducted
and as proposed to be conducted by the Buyer shall have been obtained and shall
remain in full force and effect and all statutory waiting periods in respect
thereof shall have expired.
ARTICLE
IX.
INDEMNIFICATION
Section
9.1. Survival. The
representations and warranties of the parties hereto contained in this Agreement
or in any certificate or other document delivered pursuant hereto or in
connection herewith will survive the Closing until the later of (a) the 18-month
anniversary of the Closing Date and (b) the earlier of (a) the date the Buyer
files with the SEC an annual report on Form 10-K for the fiscal year ending
December 31, 2006 or (b) April 15, 2007; provided
that the
representations and warranties in Sections 3.1,
3.2,
3.3,
3.4 and
3.26 and in
Article IV and
V will
survive indefinitely or until the latest date permitted by law, and the
representations and warranties in Sections 3.8 and
3.22 will
survive until the expiration of the applicable statute of limitations applicable
to the matters covered thereby (after giving effect to any waiver or extension
thereof). The covenants and agreements of the parties hereto contained in this
Agreement or in any certificate or other document delivered pursuant hereto or
in connection herewith will survive the Closing indefinitely or for any shorter
period explicitly specified therein, except that for those covenants and
agreements that survive for a shorter period, breaches thereof will survive
indefinitely or until the latest date permitted by law. Notwithstanding the
preceding sentences in this Section 9.1, any breach of representation, warranty,
covenant or agreement in respect of which indemnity may be sought under this
Agreement will survive the time at which it would otherwise terminate pursuant
to those preceding sentences, if notice of the inaccuracy or breach thereof
giving rise to such right of indemnity is given to the party against whom
indemnity may be sought prior to that time.
Section
9.2. Indemnification.
(a) The
Principals shall jointly and severally indemnify the Buyer and its Affiliates
and each of their respective officers, directors, employees, stockholders,
agents and representatives (and, effective at the Closing, the Company and each
of its Subsidiaries) (those parties, the “Buyer
Indemnified Parties”)
against all damages, losses, costs, claims, penalties, fines, obligations,
liabilities and expenses (including reasonable expenses of investigation and
reasonable attorneys’ fees and expenses in connection with any action, suit or
proceeding whether involving a third-party claim or a claim solely between the
parties hereto and any punitive, special, exemplary, incidental, indirect or
consequential damages, losses, liabilities or expenses, and any lost profits or
diminution in value) (all those items, collectively “Damages”),
incurred or suffered by any Buyer Indemnified Party arising out of or relating
to:
(i) any
breach of or inaccuracy in any of the representations and warranties made by the
Company and the Principals in this Agreement or in any certificate or other
document delivered pursuant hereto or in connection herewith (each such breach
or inaccuracy, a “Warranty
Breach”);
(ii) any
breach of covenant or agreement made or to be performed by the Company or any of
the Principals pursuant to this Agreement;
(iii) the Real
Estate Separation or any of the Real Estate Subsidiaries or Real Estate
Partnerships or any of their respective businesses, operations, investments,
assets,
liabilities (whether accrued, absolute, contingent or otherwise, asserted or
unasserted, known or unknown) or any other matter related
thereto;
(iv) any claim
by or on behalf of any Other Shareholder relating in any way to that Other
Shareholder’s status as a shareholder of the Company or the transactions
contemplated by this Agreement; or
(v) any
transaction or potential transaction with any Person other than the Buyer
regarding a merger, consolidation, asset sale, share exchange, stock sale or
other business combination transaction involving the Company or any Company
Securities,
in each
case regardless of whether such Damages arise as a result of the negligence,
strict liability or any other liability under any theory of law or equity of,
any Buyer Indemnified Party; provided
that with
respect to indemnification by the Principals for Warranty Breaches under Section
9.2(a)(i) (other than Warranty Breaches in respect of Sections 3.1,
3.2,
3.3,
3.4,
3.8 or
3.26 or in
Article IV or
V arising
out of fraud or intentional misrepresentation), (i) the Principals will not be
liable unless the aggregate amount of Damages with respect to Warranty Breaches
exceeds $25,000, at which point the Principals will be liable for the aggregate
amount of all Damages up to and in excess of $25,000 and (ii) each Principal’s
maximum liability with respect to Warranty Breaches will not exceed 50% of the
amount the Principal receives at the Closing in respect of the Purchase
Price.
(b) The Buyer
shall indemnify the Principals against all Damages incurred or suffered by the
Principals arising out of or relating to (i) any breach of or inaccuracy in, any
of the representations and warranties made by the Buyer in this Agreement or in
any certificate or other document delivered pursuant hereto or in connection
herewith or (ii) any breach of covenant or agreement made or to be performed by
the Buyer pursuant to this Agreement, regardless of whether such Damages arise
as a result of the negligence, strict liability or any other liability under any
theory of law or equity of, the Principals.
Section
9.3. Procedures.
The party
seeking indemnification under Section 9.2 (the “Indemnified
Party”) shall
give prompt notice to the party against whom indemnity is sought (the
“Indemnifying
Party”) of the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought under that Section. The Indemnifying
Party may at the request of the Indemnified Party participate in and control the
defense of any such suit, action or proceeding at its own expense. The
Indemnifying Party shall not be liable under Section 9.2 for any settlement
effected without its consent of any claim, litigation or proceeding in respect
of which indemnity may be sought hereunder.
Section
9.4. No
Contribution or Similar Rights. In
furtherance of the Releases the Principals are executing and delivering under
Section 8.1(o), if any claim is made against, or any payment becomes due from,
any Principal under this Article IX or under Article X, that Principal will have
no right against the Company or any of its Subsidiaries or any director, officer
or employee thereof (in their capacity as such), whether by reason of
contribution, indemnification, subrogation or otherwise, in respect of any such
claim or payment, and shall not take any action against the Company, any of its
Subsidiaries or any such person with respect thereto.
Section
9.5. Reductions
for Insurance Proceeds and Other Recoveries.
The
amount that any Indemnifying Party is or may be required to pay to any
Indemnified Party pursuant to this Article IX, shall be reduced (retroactively
or prospectively) by any insurance proceeds or other amounts actually recovered
from third parties by or on behalf of such Indemnified Party in respect of the
Damages underlying the claim for which the Indemnified Party is seeking
indemnification; provided that
nothing in this Section 9.5 obligates an Indemnified Party to seek recovery of
any such insurance proceeds or other amounts; provided
further that,
except as expressly provided in this Section 9.5, the existence of a claim by an
Indemnified Party for monies from an insurer or against a third party in respect
of any Damages shall not delay or otherwise alter any payment or other
obligation of the Indemnifying Party with respect to those Damages under this
Article IX. Notwithstanding the foregoing or any other provision of this
Agreement, it is the intention of the parties that no insurer or any other third
party shall be (i) entitled to a benefit it would not be entitled to receive in
the absence of the foregoing indemnification provisions or (ii) relieved of the
responsibility to pay any claims for which it is obligated. If an Indemnified
Party has received the payment required by this Agreement from an Indemnifying
Party in respect of any Damages and later receives insurance proceeds or other
amounts in respect of such Damages, then such Indemnified Party shall hold such
insurance proceeds or other amounts (in each case, net of any amounts expended
or costs incurred by the Indemnifying Party in obtaining such insurance proceeds
or other amounts) in trust for the benefit of the Indemnifying Party and shall
pay to the Indemnifying Party, as promptly as practicable after receipt, a sum
equal to the amount of such net insurance proceeds or other amounts received, up
to the aggregate amount of any payments received from the Indemnifying Party
pursuant to this Agreement in respect of such Damages (or, if there is more than
one Indemnifying Party, the Indemnified Party shall pay each Indemnifying Party
its proportionate share (based on payments received from the Indemnifying
Parties) of such net insurance proceeds or other amounts).
Section
9.6. Sole
and Exclusive Remedy.
Following the Closing, except as expressly provided in this Agreement, the
remedies provided in this Article IX shall be the sole and exclusive remedies of
the parties and their respective officers, directors, employees, Affiliates,
agents, representatives, successors and assigns for any breach of or inaccuracy
in any of the representations or warranties contained in this Agreement or in
any certificate or other document delivered pursuant hereto; provided,
however, that
nothing herein is intended to waive or otherwise limit any claims for Damages
resulting or arising from fraudulent or willful misconduct (including
intentional misrepresentation) or waive any equitable remedies to which a party
may be entitled.
ARTICLE
X.
CERTAIN
TAX MATTERS
Section
10.1. General
. The
following provisions shall govern the allocation of responsibility as between
the Buyer and the Principals for certain tax matters following the Closing
Date.
Section
10.2. Tax
Indemnification. Each
Principal shall jointly and severally indemnify the Company, its Subsidiaries,
Buyer, and each Buyer Affiliate and hold them harmless from and against, without
duplication, any Damages attributable to (i) all Taxes (or the non-payment
thereof) of the Company and its Subsidiaries for all taxable periods ending on
or before the Closing Date and the portion through the end of the Closing Date
for any taxable period that includes (but does not end on) the Closing Date (the
“Pre-Closing
Tax Period”), (ii)
all Taxes of any member of an affiliated, consolidated, combined or unitary
group of which the Company or any of its Subsidiaries (or any predecessor of any
of the foregoing) is or was a member on or prior to the Closing Date, including
pursuant to Treasury Regulation §1.1502-6 or any analogous or similar state,
local, or foreign law or regulation, and (iii) any and all Taxes of any Person
(other than the Company and its Subsidiaries) imposed on the Company or any of
its Subsidiaries as a transferee or successor, by contract or pursuant to any
law, rule, or regulation, which Taxes relate to an event or transaction
occurring before the Closing; provided, however, that in the case of clauses
(i), (ii), and (iii) above, the Principals shall be liable only to the extent
that such Taxes exceed the amount, if any, reserved for such Taxes (excluding
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) on the face of the Closing Balance Sheet (rather than in
any notes thereto) and taken into account in determining the purchase price
adjustment under Section 2.5. The Principals shall reimburse the Buyer for any
Taxes of the Company or its Subsidiaries that are the responsibility of the
Principals pursuant to this Section 10.2 within fifteen (15) business days after
payment of such Taxes by the Buyer, the Company, or its
Subsidiaries.
Section
10.3. Straddle
Period. In the
case of any taxable period that includes (but does not end on) the Closing Date
(a “Straddle
Period”), the
amount of any Taxes based on or measured by income or receipts of the Company
and its Subsidiaries for the Pre-Closing Tax Period shall be determined based on
an interim closing of the books as of the close of business on the Closing Date
(and for such purpose, the taxable period of any partnership or other
pass-through entity in which the Company or any of its Subsidiaries holds a
beneficial interest shall be deemed to terminate at such time) and the amount of
other Taxes of the Company and its Subsidiaries for a Straddle Period that
relates to the Pre-Closing Tax Period shall be deemed to be the amount of such
Tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the Closing Date and
the denominator of which is the number of days in such Straddle
Period.
Section
10.4. Responsibility
for Filing Tax Returns. The
Buyer shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns for the Company and its Subsidiaries that are filed after the
Closing Date. The Buyer shall permit the Shareholders’ Representative to review
each such Tax Return described in the preceding sentence prior to
filing.
Section
10.5. Cooperation
on Tax Matters.
(a) Buyer,
the Company and its Subsidiaries, and the Principals shall cooperate fully, as
and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to Section 10.4 and any audit, litigation or
other proceeding with respect to Taxes.
(b) The Buyer
and the Principals further agree, upon request, to provide the other Party with
all information that either Party may be required to report pursuant to Code
Section 6043 and all Treasury Regulations promulgated thereunder.
Section
10.6. Tax-Sharing
Agreements. All
tax-sharing agreements or similar agreements with respect to or involving the
Company and its Subsidiaries shall be terminated as of the Closing Date and,
after the Closing Date, the Company and its Subsidiaries shall not be bound
thereby or have any liability thereunder.
Section
10.7. Certain
Taxes and Fees. All
transfer, documentary, sales, use, stamp, registration and other such Taxes, and
all conveyance fees, recording charges and other fees and charges (including any
penalties and interest) incurred in connection with consummation of the
transactions contemplated by this Agreement shall be paid by the Principals when
due, and Principals will, at their own expense, file all necessary Tax Returns
and other documentation with respect to all such Taxes, fees and charges, and,
if required by applicable law, the Buyer will, and will cause its Affiliates to,
join in the execution of any such Tax Returns and other
documentation.
ARTICLE
XI.
TERMINATION/SURVIVAL
Section
11.1. Termination.
(a) This
Agreement may be terminated at any time prior to the Closing as
follows:
(i) by the
mutual written consent of the Buyer and the Principals;
(ii) by either
the Buyer or the Principals, if the Closing has not occurred by
September 30, 2005;
(iii) by either
the Buyer or the Principals if there is any law or regulation that makes
consummation of the transactions contemplated by this Agreement illegal or
otherwise prohibited, or if consummation of the transactions contemplated by
this Agreement would violate any nonappealable final order, decree or judgment
of any court or other Governmental Authority having competent jurisdiction;
or
(iv) by either
the Buyer or the Principals, (A) if there has been material misrepresentation,
breach of warranty or breach of covenant or other obligation under this
Agreement on the part of any of the Principals or the Company (in the case of a
termination by the Buyer) or on the part of the Buyer (in the case of a
termination by the Principals); or (B) if any condition to the obligations of
the terminating party to consummate the Closing under this Agreement becomes
incapable of fulfillment through no fault of the terminating party.
(b) The
termination of this Agreement shall be effectuated by the delivery by the party
terminating this Agreement to the other party of a written notice of such
termination.
Section
11.2. Effect
of Termination. If this
Agreement is terminated as permitted by Section 11.1, the termination will be
without liability of any party (or any stockholder, director, officer, employee,
agent, consultant or representative of any party) to any other party to this
Agreement; provided
that if
the termination results from the (i) willful failure of a party to fulfill a
condition to the performance of the obligations of another party, (ii) failure
to perform a covenant of this Agreement or (iii) breach by any party to this
Agreement of any representation or warranty or agreement contained herein, the
failing or breaching party will be fully liable for any and all Damages incurred
or suffered by any other party as a result of such failure or breach. The
provisions of Sections 7.2, 11.2, 12.1 and 12.6 and Sections 12.9 through 12.2
will survive any termination of this Agreement pursuant to Section
11.1.
ARTICLE
XII.
MISCELLANEOUS
Section
12.1. Expenses.
(a) Except as
otherwise provided in this Agreement, all costs and expenses incurred in
connection with this Agreement are to be paid by the party incurring those costs
or expenses. Without limiting the generality of the foregoing sentence, the
Principals shall bear all costs and expenses they incur in connection with this
Agreement and shall not cause the Company or any of its Subsidiaries to pay or
reimburse any of the Principals for any of those costs and
expenses.
(b) Notwithstanding
Section 12.1(a):
(i) the
Company shall pay, and the Principals shall cause the Company to pay, prior to
the Closing Date, all costs and expenses associated with requesting and/or
obtaining consents from any Persons not party to this Agreement that are
incurred in connection with the transactions contemplated by this Agreement,
including all costs and expenses associated with the Client Consent Requests;
and
(ii) the
Company shall pay, and the Principals shall cause the Company to pay, prior to
the Closing Date, all expenses of the Mutual Funds arising out of the
transactions contemplated by this Agreement, including without limitation
(A) the expenses of preparing, filing, printing and mailing the Proxy
Statement and the cost of any proxy solicitation firm; (B) the cost of any
prospectus supplements; and (C) costs of preparing, negotiating and
executing new advisory and distribution agreements.
Section
12.2. Amendments;
Waiver.
(a) Any
provision of this Agreement may be amended or waived if, but only if, the
amendment or waiver is in writing and is signed, in the case of an amendment, by
each
party to
this Agreement, or in the case of a waiver, by the party against whom the waiver
is to be effective.
(b) No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies in this
Agreement provided are cumulative and not exclusive of any rights or remedies
provided by law.
Section
12.3. Entire
Agreement. This
Agreement, the Supplemental Confidentiality Agreement and the letter agreement
dated as of the date hereof between the Buyer and the Company constitute the
entire agreement between the parties with respect to the subject matters hereof
and thereof and supersedes all prior agreements and understandings, both oral
and written, between the parties with respect to the subject matters hereof and
thereof.
Section
12.4. Specific
Performance; Injunctive Relief. The
parties agree that irreparable damage would occur if any provision of this
Agreement were not performed in accordance with its terms and that the parties
are entitled to an injunction or injunctions to prevent breaches of this
Agreement or to enforce specifically the performance of the terms and provisions
of this Agreement in any court of competent jurisdiction, in addition to any
other remedy to which they are entitled at law or in equity.
Section
12.5. Severability. If any
term, provision, covenant or restriction of this Agreement is held by a court or
other Governmental Authority of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement are to remain in full force and effect and are in
no way to be affected, impaired or invalidated so long as the economic and legal
substance of the transactions contemplated by this Agreement are not affected in
any manner materially adverse to any party. Upon such a determination, the
parties shall negotiate in good faith to modify this Agreement to effect the
original intent of the parties as closely as possible in an acceptable manner so
that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
Section
12.6. Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed given if (a) delivered in person, (b) transmitted by telecopy (with
confirmation), (c) mailed by certified or registered mail (return receipt
requested) or (d) delivered by an express courier (with confirmation) to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to the
Buyer:
Washington
Trust Bancorp, Inc.
00 Xxxxx
Xxxxxx
Xxxxxxxx,
Xxxxx Xxxxxx 00000
Facsimile:
(000) 000-0000
Attention:
Chief Executive Officer or President
With a
copy to:
Xxxxxxx
Procter LLP
Exchange
Place
00 Xxxxx
Xxxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
Facsimile:
(000) 000-0000
Attention:
Xxxx X. Xxx, P.C.
If to the
Company or the Shareholders:
Weston
Financial Group, Inc.
00
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Facsimile:
000-000-0000
Attention:
Xxxxx X. Xxxxxxx
With a
copy to:
Xxxxx
Xxxxxxx LLP
000
Xxxxxx Xxxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxx S, Bacon, Jr., P.C.
Section
12.7. Binding
Effect; No Third-Party Beneficiaries; No Assignment. This
Agreement inures to the benefit of and is binding upon the parties and the
respective successors and permitted assigns. Nothing in this Agreement is
intended to confer (or is to be construed as conferring) upon any Person other
than the parties and their respective successors and permitted assigns any
right, remedy or claim under or by reason of this Agreement or any provision
hereof. Without the prior written consent of the parties hereto, this Agreement
may not be assigned by any of the parties hereto, except that the Buyer may at
any time assign all or any portion of its rights and obligations hereunder to
any of its Affiliates; provided that, in
the case of such an assignment, the Buyer will remain liable for all of its
obligations under this Agreement.
Section
12.8. Counterparts. This
Agreement may be executed in two or more counterparts, each of which is to be
deemed an original, but all of which taken together are to constitute one and
the same Agreement.
Section
12.9. Governing
Law. This
Agreement is to be governed by the laws of the State of Rhode
Island.
Section
12.10. Service;
Jurisdiction. The
parties agree that any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby shall be brought in the United
States District Court for the District of Rhode Island or any Rhode Island state
court, so long as one of those courts has subject matter jurisdiction over the
suit, action or proceeding, and that any cause of action arising out of this
Agreement is to be deemed to have arisen from a transaction of
business
in the State of Rhode Island, and each of the parties hereby irrevocably
consents to the jurisdiction of those courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection that it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
in any of those courts or that any such suit, action or proceeding brought in
any of those courts has been brought in an inconvenient forum. Process in any
such suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any of those courts.
Without limiting the foregoing, each party agrees that service of process on
such party as provided in Section 12.6 shall be deemed effective service of
process on such party.
Section
12.11. WAIVER
OF JURY TRIAL. EACH OF
THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section
12.12. Drafting
Conventions; No Construction Against Drafter.
(a) The
headings in this Agreement are provided for convenience and do not affect its
meaning. The words “include”, “includes” and “including” are to be read as if
they were followed by the phrase “without limitation”. Unless specified
otherwise in this Agreement, any reference to an agreement means that agreement
as amended or supplemented, subject to any restrictions on amendment contained
in such agreement. Unless specified otherwise, any reference to a statute or
regulation means that statute or regulation as amended or supplemented from time
to time and any corresponding provisions of successor statutes or regulations.
If any date specified in this Agreement as a date for taking action falls on a
day that is not a business day, then that action may be taken on the next
business day. Unless specified otherwise, the words “party” and “parties” refer
only to a named party to this Agreement.
(b) The
parties have participated jointly in the negotiation and drafting of this
Agreement. If an ambiguity or question of intent or interpretation arises, this
Agreement is to be construed as if drafted jointly by the parties and there is
to be no presumption or burden of proof favoring or disfavoring any party
because of the authorship of any provision of this Agreement.
Section
12.13. Shareholders’
Representative.
(a) Each of
the Shareholders hereby irrevocably constitutes and appoints Xxxxx X. Xxxxxxx
(the “Shareholders’
Representative”) as
that Shareholder’s true and lawful agent and attorney-in-fact for the purposes
specified in Section 12.13(b). This power of attorney is coupled with an
interest and is irrevocable. The Shareholders’ Representative shall serve
without compensation.
(b) The
Shareholders’ Representative shall have full power and authority, on behalf of
all Shareholders, to control, and resolve all disputes concerning matters
described in Sections 2.2 and 2.4 through 2.8. In furtherance of the foregoing
and with respect to those matters, the Shareholders’ Representative shall have
the power to enter into any agreement in connection therewith, to exercise all
or any of the powers, authority and discretion conferred upon it under this
Agreement, to waive any terms and conditions of this Agreement, to give and
receive
notices on behalf of the Shareholders and to be the Shareholders’ exclusive
representative with respect to any matter, suit, claim, action or proceeding
arising with respect to the matters described in Sections 2.2, 2.4 through 2.8
and Section 10.4. The Shareholders’ Representative agrees to act as, and to
undertake the duties and responsibilities of, such agent and
attorney-in-fact.
(c) If,
following the date of this Agreement, Xxxxx X. Xxxxxxx ceases to serve as the
Shareholders’ Representative for any reason, then the Principals shall elect, by
a majority vote of the Principals that will be binding upon all of the
Principals and the Other Shareholders, another Principal to serve as a successor
to Xx. Xxxxxxx as the Shareholder’s Representative, and that successor will
thereupon be deemed to be the Shareholders’ Representative for all purposes
under this Agreement and will be vested in all the powers, and subject to all of
the obligations, of the Shareholders’ Representative under this
Agreement.
(d) The Buyer
and its Affiliates and their respective officers, directors, employees, agents,
advisors and representatives shall be entitled to rely on any actions taken by
the Shareholders’ Representative under this Agreement without any liability or
obligation to any of the Shareholders, notwithstanding any knowledge on the part
of the Buyer or any of its Affiliates or any of their respective officers,
directors, employees, agents, advisors or representatives of any dispute,
disagreement or controversy regarding or involving any of the
Shareholders.
[Signature
Pages Follow]
IN
WITNESS WHEREOF, the parties are signing this Agreement as of the date first
above written.
WASHINGTON
TRUST BANCORP, INC.
By:
/s/
Xxxx X. Xxxxxx
Name:
Xxxx X. Xxxxxx
Title:
Chairman and Chief Executive Officer
WESTON
FINANCIAL GROUP, INC.
By:
/s/ I.
Xxxxxxx Xxxxxxxx
I.
Xxxxxxx Xxxxxxxx, President
/s/ I.
Xxxxxxx Xxxxxxxx
I.
Xxxxxxx Xxxxxxxx
/s/
Xxxxxx Xxxxxx, Xx.
Xxxxxx
Xxxxxx, Xx.
/s/
Xxxxxxx X. Xxxxxx
Xxxxxxx
X. Xxxxxx
/s/
Xxxxx X. Xxxxxxx
Xxxxx X.
Xxxxxxx
/s/
Xxxxxx X. Stock
Xxxxxx X.
Stock
/s/
Xxxxxx X. Xxxxxxxx
Xxxxxx X.
Xxxxxxxx
Other
Shareholders:
Xxxxxxx
X. X’Xxxxx and Xxxxx X’Xxxxx, as Joint Tenants
Xxx X.
Xxxxxxxxx
Xxxxxxxxx
X. Xxxx
First
Trust Corporation, as Trustee of the Xxxxxxx Xxxxxxxxxx Profit Sharing
Plan
First
Trust Corporation FBO Xxxxxx X. Xxxxx
Xxxxxx
Xxxxxx
Dr. Xxxxx
Xxxxxxx, Trustee
Xxxxx
Xxxxxx, III
Xxxxxxx
X. Xxxxxx
Xxxxxxx
X. Xxxxxx
Xxxxx X.
Xxxxxx
Pensco
Trust Co. FBO Xxxxx X. Xxxxx MD XXX Acct GR-240
Xxxxx X.
Xxxxx
By:
/s/ I.
Xxxxxxx Xxxxxxxx
I.
Xxxxxxx Xxxxxxxx
Attorney-in-Fact
By:
/s/
Xxxxxx Xxxxxx, Xx.
Xxxxxx
Xxxxxx, Xx.
Attorney-in-Fact
By:
/s/
Xxxxxxx X. Xxxxxx
Xxxxxxx
X. Xxxxxx
Attorney-in-Fact
By:
/s/
Xxxxx X. Xxxxxxx
Xxxxx X.
Xxxxxxx
Attorney-in-Fact
By:
/s/
Xxxxxx X. Stock
Xxxxxx X.
Stock
Attorney-in-Fact
By:
/s/
Xxxxxx X. Xxxxxxxx
Xxxxxx X.
Xxxxxxxx
Attorney-in-Fact
